The official cash rate has been held steady for the fourth month in a row but the Reserve Bank’s new chief is alert to bubbling inflation risks.
The RBA board opted to leave interest rates at 4.1 per cent at the first meeting with new governor Michele Bullock at the helm.
The October decision marks the fourth month on the sidelines after an intense series of increases.
The call was broadly expected by economists and markets despite inflation bumping higher in the August consumer price index.
In a statement following the meeting on Tuesday, Ms Bullock stuck to the script and left the language largely unchanged from her predecessors’ September edition.
But she kept the door open to more increases if needed.
“Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will continue to depend upon the data and the evolving assessment of risks,” she said.
Following a stronger set of inflation numbers in the monthly consumer price index for August, economists warned the fight against inflation had not yet been won.
The headline number lifted 5.2 per cent annually, driven higher by rising fuel prices from 4.9 per cent in July.
In the post-meeting statement, Ms Bullock noted the evolving inflation profile.
“Timely indicators on inflation suggest that goods price inflation has eased further, but the prices of many services are continuing to rise briskly and fuel prices have risen noticeably of late.”
The quarterly inflation numbers are due later in the month and will offer a more comprehensive update on price movements.
EY senior economist Paula Gadsby said there was no immediate need for the RBA to lift interest rates but if inflation looked to be taking longer than expected to return to the two-three per cent target range, another hike was possible.
“Given higher oil prices and the possibility that the decline in inflation may slow down, interest rates, globally, may have to stay elevated for longer than previously anticipated,” Ms Gadsby said.
Treasurer Jim Chalmers said the interest rate call would offer a welcome reprieve for Australians doing it tough.
“The government’s highest priority is rolling out billions of dollars in cost of living relief in a way that takes some of the sting out of these costs without adding to inflation,” he said.
-AAP
