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Saturday, May 18, 2024

RBA Expected to Hold Interest Rates Steady at May 2024 Meeting

Key Takeaways:

  • The RBA is expected to hold interest rates steady at 4.35% during its May 2024 meeting
  • AUD/USD has increased over the past few days, as markets await the RBA meeting.
  • The RBA forecasts the cash rate is expected to remain around its current level until the middle of the year before gradually declining over the remainder of the forecast period.

RBA Meeting

The Reserve Bank of Australia (RBA) is set to hold its next monetary policy meeting in May 2024, with the consensus that the central bank will maintain the cash rate target at 4.35%. This decision comes as inflation moderates and a gradual easing of labor market conditions in Australia. AUD/USD has increased over the past few days, as markets await the RBA meeting:

AUDUSD 5-Day

At the previous RBA meeting in February 2024, the central bank acknowledged that while inflation continues to moderate, it remains high. The RBA expects inflation to return to the target range of 2-3% in 2025 and reach the midpoint in 2026. Goods price inflation has declined, but services price inflation remains elevated due to excess demand in the economy and strong domestic cost pressures.

RBA Previous Decision and Details

The RBA has emphasized that higher interest rates are working to establish a more sustainable balance between demand and supply in the economy. The current stance of monetary policy is restrictive. The central bank expects that a period of subdued demand growth and moderate employment growth over the next year or two will help bring about a better balance between supply and demand.

The decision to leave the cash rate target unchanged at 4.35% in February was aimed at supporting the progress of inflation towards the midpoint of the target range within a reasonable timeframe while maintaining moderate growth in employment.

The RBA is likely to maintain its cautious approach. While global inflation remains high, there has been encouraging progress towards central banks’ targets, with much of the easing in inflation in advanced economies attributed to lower energy and goods price inflation. However, service price inflation remains elevated.

In Australia, growth in demand has slowed, with household spending growth remaining weak and per capita spending declining. High inflation, higher interest rates, and tax payments have weighed on household disposable incomes, leading to a curbing of spending, particularly on discretionary items. The RBA expects overall demand growth to remain subdued in the near term as these factors continue to impact consumption.

Forecast

The RBA’s forecasts are conditioned on a path of the cash rate target based on the expectations of market economists and financial market pricing. In this path, the cash rate is expected to remain around its current level until the middle of the year before gradually declining over the remainder of the forecast period.

The RBA is expected to hold interest rates steady at 4.35% during its May 2024 meeting, as it assesses the impact of previous rate hikes on inflation and the broader economy.

Lazarus
Lazarushttps://ljlnews.com
Publisher and editor of LJLNews. I am a Stock Market enthusiast, with an interest for politics. I hope you enjoy reading the articles! Contact me at: Lazaruslucas@ljlnews.com

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