By James Glynn
SYDNEY--The Reserve Bank of Australia left interest rates unchanged Tuesday, and stuck with the message that it isn't ruling anything out as it seeks to bring inflation under control.
The RBA held the official cash rate at 4.35%, where it has remained since November. The outcome was widely anticipated by economists.
"The path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe remains uncertain and the Board is not ruling anything in or out," the RBA said at the end of a two-day policy meeting.
That repeated language used by the RBA board at the conclusion of its previous meeting in March.
Tuesday's decision follows first quarter inflation data that came in above the RBA's own forecasts. The central bank acknowledged on Tuesday that price pressures appear to be easing more slowly than expected, but said medium-term expectations for inflation remain consistent with its target band of 2-3%.
In the run up the meeting, economists had suggested the RBA could be motivated to turn hawkish in the wake of the quarterly inflation data and because Australia's job market is also performing more strongly than expected. The unemployment rate is back around its lowest level in close to half a century.
Many of the RBA's global counterparts have been more explicit in signaling that they expect the next move in interest rates will be down. The Federal Reserve has suggested an interest-rate cut in the U.S. is still more likely than an increase, despite a string of disappointing readings on price and wage pressures. The Bank of England, which meets this week, and the Bank of Canada have also signaled they are moving toward a point where borrowing costs could fall.
Still, central banks are attempting to walk a fine line. Ease policy too soon and officials could allow inflation to become entrenched at an uncomfortable level. On the other hand, restrictive settings can damage economies if maintained for too long.
The RBA remains conscious that the current level of interest rates is curbing spending. Consumers are battling a sharp jump in living costs, and soaring mortgage interest rates are making that pain more acute.
Australia's bankruptcy regulator warned recently that personal insolvencies are rising quickly.
"There is a risk that household consumption picks up more slowly than expected, resulting in continued subdued output growth and a noticeable deterioration in the labor market," the RBA said on Tuesday.
By standing pat, the RBA can wait to see what policy moves are taken by the center-left Labor government, which will announce its budget on May 14 for the 12 months through June, 2025. With an election expected early next year, the government might be tempted to increase spending to help offset the cost of living, while betting that it won't add more fuel to inflation.
Write to James Glynn at james.glynn@wsj.com
(END) Dow Jones Newswires
05-07-24 0102ET
