RBA unveils cash rate call for August 2024

The Reserve Bank has held the cash rate at 4.35 per cent in its last five meetings. Has it now decided to make a move?

After holding the cash rate at 4.35 per cent in the five meetings it has thus far held in 2024, the Reserve Bank of Australia has decided to hold the cash rate at 4.35 per cent.

In a statement, the board of the Reserve Bank said: "The economic outlook is uncertain and recent data have demonstrated that the process of returning inflation to target has been slow and bumpy."

"The central forecasts set out in the latest SMP are for inflation to return to the target range of 2–3 per cent late in 2025 and approach the midpoint in 2026. This represents a slightly slower return to target than forecast in May, based on estimates that the gap between aggregate demand and supply in the economy is larger than previously thought. In part, this reflects an increase in the forecast for domestic demand. But it also reflects a judgement that the economy’s capacity to meet that demand is somewhat weaker than previously thought, evidenced by the persistence of inflation and ongoing strength in the labour market," it said.

"There is substantial uncertainty around these forecasts. Revisions to consumption and the saving rate in the most recent National Accounts, high unit labour costs and the persistence of inflation – particularly in the services sector – suggest there are upside risks to inflation. Wages growth appears to have peaked but is still above the level that can be sustained given trend productivity growth."