For the third consecutive month, the Reserve Bank, led by Governor Philip Lowe, has opted to keep interest rates unchanged, marking the conclusion of his extensive career at the bank.
This decision maintains the bank’s key cash rate at a decade-high of 4.1%, a level it has held since the increase in June.
The widely expected choice had minimal impact on the ASX and the value of the Australian dollar after the announcement was made at 2:30 pm Sydney time. In his final post-meeting statement, RBA Governor Philip Lowe noted that while inflation remains above the target range, it is now receding due to the effects of higher interest rates impacting household finances.
“In light of this, and the uncertainty surrounding the economic outlook, the Board once again chose to maintain interest rates for this month,” Lowe stated on Tuesday afternoon.
“This decision will allow for further assessment of the impact of the interest rate increase thus far and the evolving economic prospects.”
Most economists had anticipated the September pause, with a growing consensus that rates will remain steady as the economy slows and inflation continues to ease.
However, the duration of this pause remains uncertain. In their commentary, National Australia Bank economists highlighted that while interest rates remain unchanged this month, the cost of essential expenses such as petrol, groceries, and energy bills continues to rise.
“Today’s decision brings relief to around a third of Australians with mortgages, yet we acknowledge that rising living costs still trouble many more individuals. Some people are concerned about their financial situations,” the NAB economics team conveyed in their assessment after the RBA announcement.
As he has done in previous post-meeting statements, Dr. Lowe cautioned that the possibility of rate hikes still exists.
“Further tightening of monetary policy might be necessary to ensure a reasonable timeline for inflation to return to the target range. This decision will continue to depend on data and an evolving assessment of risks,” he articulated.
Lowe underscored the uncertain outlook for household consumption, highlighting the financial pressure on many households juxtaposed with those benefiting from rising housing prices, significant savings, and increased interest income.
“Moreover, on a global scale, uncertainties regarding the Chinese economy have intensified due to ongoing strains in the property market,” Lowe added.
Lowe is scheduled to deliver his final speech as governor, titled “Some Closing Remarks,” tomorrow before passing the reins to Michelle Bullock (the current deputy Governor) on September 18.