Reserve Bank holds course on interest rates

The Reserve Bank has held interest rates steady while predicting inflation will remain in its 2-3 per cent inflation target until the middle of next year before climbing due to the end of federal energy rebates. At its second last meeting of the year, the bank kept the official cash rate at 4.35 per cent, marking 12 months since it last lifted it.

Financial markets and economists had expected the bank to hold steady, with no movement expected until at least February. New forecasts released by the bank show it believes headline inflation – which fell to a three-year low of 2.8 per cent in the September quarter – is likely to edge down even further.



The bank has maintained it wants to see inflation “sustainably” in its target band before cutting rates. Credit: Louie Douvis By the middle of 2025, the RBA believes inflation will be at 2.5 per cent, the mid-point of its inflation target.

Unless the federal government continues with energy rebates , inflation is then tipped to jump to 3.7 per cent by the end of next year before gradually falling back to 2.5 per cent by the end of 2026.

But while headline inflation will “remain lower for a time”, according to the bank, underlying inflation – which is not expected to ease to 3 per cent until mid-2025 – “remains too high”. Loading In its quarterly monetary policy statement, the bank said the economy was still operating above its capacity to produce goods and services without adding to inflation, but conditions were continuing to ease. “Underlying inflation is expected to return to the target range of 2-3 per cent in mid to late 2025 and to the midpoint of the target in late 2026,” it said.

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