The Reserve Bank has made its cash rate decision for October, with the board flagging some major uncertainties in the future of the economy. The Reserve Bank of Australia (RBA) has decided to hold the official cash rate at 4.1 per cent for the fourth consecutive month following its October monetary policy meeting. Notably, the October board meeting has marked the initial meeting with Ms Bullock presiding as the central bank's governor.
Ms Bullock assumed the role of governor on 18 September following the retirement of former governor Philip Lowe after his seven-year tenure in the position.
On the decision, Ms Bullock said: "The recent data are consistent with inflation returning to the 2–3 per cent target range over the forecast period and with output and employment continuing to grow. Inflation is coming down, the labour market remains strong and the economy is operating at a high level of capacity utilisation, although growth has slowed.
"There are significant uncertainties around the outlook. Services price inflation has been surprisingly persistent overseas and the same could occur in Australia.
"There are also uncertainties regarding the lags in the effect of monetary policy and how firms' pricing decisions and wages respond to the slower growth in the economy at a time when the labour market remains tight.
"The outlook for household consumption also remains uncertain, with many households experiencing a painful squeeze on their finances, while some are benefiting from rising housing prices, substantial savings buffers and higher interest income. "Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable time frame, but that will continue to depend upon the data and the evolving assessment of risks."
Reacting to the decision, CreditorWatch chief economist Anneke Thompson said the decision to hold the cash rate steady comes as ongoing weak retail trade and consumer confidence gave the RBA "the clear signal that their efforts to reduce demand in the economy have worked very well".
"While some items in the Consumer Price Index (CPI) 'basket' continue to record price rises, these rises are by and large not related to high consumer demand, and therefore not enough to convince the RBA to move again to cool demand further," Ms Thompson said.
Westpac's forecasts are for the cash rate to stay at 4.1% un til June 2024 when rates start to drop and reduce to 3.1% by June 2025.