The Reserve Bank of Australia has held the official cash rate steady at 3.85 per cent at its May board meeting, with Governor Michele Bullock indicating that while inflation is moving in the right direction, the bank is not yet confident enough to cut rates further.
The decision was broadly expected by markets, though some economists had flagged a small chance of a cut following softer-than-expected quarterly CPI figures released last month.
The bank’s reasoning
In a statement accompanying the decision, the board noted that underlying inflation had fallen to 3.2 per cent — still above the 2-3 per cent target band — and that the labour market remained resilient, with unemployment holding at 4.1 per cent.
“The board needs to be confident that inflation is sustainably moving back to target before making further adjustments to the cash rate,” Governor Bullock said at a press conference following the decision.
The next scheduled rate decision is in June, with most economists now forecasting the RBA will cut rates at least once before year’s end, though opinions differ on the timing.
For households with average mortgages, the hold means another month of elevated repayments, with a 0.25 per cent cut estimated to save borrowers approximately $85 per month on a $600,000 loan.
