RBA maintains cash rate, anticipates inflation resurgence post-mid-2025

RBA kept its cash rate target unchanged at 4.35%, as widely expected. Maintaining its stance of “not ruling anything in or out,” the highlighted that underlying inflation “remains too high” and stated it will be “some time yet” before inflation sustainably returns to the target range. The central bank emphasized that monetary policy will need to be “sufficiently restrictive” until the Board is confident that inflation is moving sustainably towards the target range.

In its new economic projections, RBA forecasts headline inflation to briefly dip to 2.8% in June 2025, back in the target range, but expects it to surge above the target in subsequent quarters before falling back to 2.6% by the end of 2026. Meanwhile, growth projections have been generally upgraded.

Details of the new economic projections include:

CPI at:

• 3.0% by the end of 2024, downgraded from the prior 3.8%.
• 3.7% by the end of 2025, upgraded from the previous 2.8%.
• 2.6% by the end of 2026 (new projection).

Trimmed mean CPI at:

• 3.5% by the end of 2024, up from 3.4%.
• 2.9% by the end of 2025, up from 2.8%.
• 2.6% by the end of 2026 (new projection).

Year-average GDP growth in:

• 2024 downgraded from 1.3% to 1.2%.
• 2025 upgraded from 2.1% to 2.5%.
• 2026 projected to be 2.4% (new).

Unemployment rate at:

• 4.3% by the end of 2024, up from the prior 4.2%.
• 4.4% by the end of 2025, up from 4.3%.
• be 4.4% by the end of 2026 (new projection).

Full RBA statement here.

Full RBA SoMP here.