AU RBA Monetary Policy Statement

Financial conditions are restrictive, which is weighing on demand and is helping to bring down underlying inflation. Growth in private demand has been subdued even though household consumption growth looks to have picked up late last year. Public demand has supported overall growth in economic activity over recent quarters. Underlying inflation has moderated over the past three quarters. Trimmed mean inflation eased to 3.2 per cent over 2024. It is expected to reach the 2–3 per cent target range in early 2025, which is sooner than expected at the time of the November Statement. Headline inflation declined to 2.4 per cent over 2024. Headline inflation remains lower than underlying inflation, mostly because of the impact of federal and state government subsidies to households. post: RBA FORECASTS TRIMMED MEAN INFLATION 2.7% MONTH ON MONTH JUN 2025, 2.7% MONTH ON MONTH JUN 2026, 2.7% MONTH ON MONTH JUN 2027 post: RBA BOARD MORE CONFIDENT INFLATION MOVING SUSTAINABLY TOWARDS MIDPOINT OF 2-3 PER CENT TARGET RANGE post: RBA: RECENT LABOUR MARKET DATA STRONG, INDICATING LABOR MARKET MAY BE TIGHTER THAN PREVIOUSLY THOUGHT post: RBA: FORECASTS CPI AT 2.4% JUN 2025, 3.2% JUN 2026, 2.7% JUN 2027

Headline inflation has fallen sharply in recent months as expected, due to declines in fuel and electricity prices. Headline inflation was 2.8 per cent over the year to the September quarter, down from 3.8 per cent over the year to the June quarter. This was as expected due to declines in fuel and electricity prices in the September quarter. But part of this decline reflects temporary cost-of-living relief. Underlying inflation, which is more indicative of inflation momentum, remains too high. Trimmed mean inflation was 3.5 per cent over the year to the September quarter and in quarterly terms the pace of decline has been gradual since mid-2023. post: RBA EXPECTS CORE INFLATION TO REACH 2.5% TARGET MIDPOINT BY LATE 2026 post: RBA WARNS OF NEED TO REMAIN VIGILANT AGAINST POTENTIAL INFLATIONARY PRESSURES post: RBA: LABOR MARKET CONDITIONS REMAIN TIGHT post: RBA PRIORITIZES SUSTAINABLY RETURNING INFLATION TO TARGET

Inflation is still too high and is coming down slower than we expected. There is a risk that inflation stays above the target range for too long. Bringing inflation down in a reasonable timeframe is the Board’s highest priority. Economic growth is expected to pick up next year. The outlook for growth has been upgraded due to stronger-than-forecast public demand as well as a pick-up in household spending as real incomes rise. These factors are expected to be partly offset by stronger growth in imports, and weaker growth in housing ...

At its meeting today, the Board decided to leave the cash rate target unchanged at 4.35 per cent and the interest rate paid on Exchange Settlement balances unchanged at 4.25 per cent. Inflation remains high and is falling more gradually than expected. Recent information indicates that inflation continues to moderate, but is declining more slowly than expected. The CPI grew by 3.6 per cent over the year to the March quarter, down from 4.1 per cent over the year to December. Underlying inflation was higher than headline inflation and ...