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Posted: 2024-11-05 03:30:23

The Reserve Bank of Australia has kept interest rates on hold at 4.35 per cent for its eight-straight meeting, despite inflation falling to its lowest level in almost four years.

Economists and analysts almost unanimously expected the central bank to leave the cash rate at its highest level since November 2011.

While headline inflation fell to 2.8 per cent in the September quarter — the lowest level in three-and-a-half-years — the RBA said it remained too high to consider cutting rates.

Tuesday's decision also means it has been 12 months since the RBA last increased interest rates by 0.25 percentage points.

In a statement, the RBA said while inflation has "fallen substantially" since it peaked in 2022, underlying inflation remained too high at 3.5 per cent in the September quarter.

"While headline inflation has declined substantially and will remain lower for a time, underlying inflation is more indicative of inflation momentum, and it remains too high," it said.

"The November SMP forecasts suggest that it will be some time yet before inflation is sustainably in the target range and approaching the midpoint.

"This reinforces the need to remain vigilant to upside risks to inflation and the Board is not ruling anything in or out.

"Policy will need to be sufficiently restrictive until the Board is confident that inflation is moving sustainably towards the target range."

The RBA noted that while higher rates were "working broadly as anticipated", there were a number of uncertainties, including the outlook overseas. 

However, the central bank did not mention the looming US presidential election as a potential risk factor.

"Public authorities in China have responded to the weak outlook for economic activity by implementing more expansionary policies, although the impact (and in some cases the specific details) of these measures remains to be seen," it said.

"Geopolitical uncertainties remain pronounced."

The RBA's decision to leave interest rates unchanged after November's two-day meeting comes as central banks overseas continue cutting rates.

The US Federal Reserve is meeting on Thursday, local time, where it is expected to reduce interest rates by 0.25 percentage points.

The US central bank cut rates by 0.5 per cent in September to the current level of 4.75 to 5 per cent.

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