The Reserve Bank of Australia (RBA) has maintained the official cash rate at 4.35%, a level the bank describes as 'restrictive' [cef422c1]. This decision comes amid growing calls for the RBA to consider cutting rates due to evidence from inflation, wages, and employment data [98312638]. The Australian Securities Exchange (ASX) 200 closed down 0.41% at 8,131 points, reflecting investor concerns about economic conditions [cef422c1].
RBA Governor Michele Bullock has indicated that rates are unlikely to return to the low levels seen during the COVID-19 pandemic. Underlying inflation remains elevated at 3.5%, with forecasts suggesting it may return to the target range by mid-2025 [cef422c1]. However, recent analysis suggests that the RBA should cut rates now, especially considering that the US Federal Reserve has reduced rates by 0.75 percentage points since September 2024, with the US October Consumer Price Index (CPI) at 2.6% and core inflation at 3.3% [98312638].
In Australia, the September quarter CPI rose by 2.8%, and the October jobs report showed only 16,000 new jobs were created, keeping the unemployment rate at 4.1% [98312638]. These figures suggest that the Australian economy may not be as robust as previously thought, raising questions about the RBA's current monetary policy approach. Critics argue that Bullock and the board have been scapegoating foreign tourists and students for the resilience of consumer demand, which undermines their efforts to reduce household spending [73e9dbfa]. This perspective has been criticized as xenophobic and disconnected from the realities of the economy [73e9dbfa].
The RBA is closely monitoring global economic developments, particularly in major economies like China and the US, as these factors could influence future monetary policy decisions [cef422c1]. Meanwhile, the resignation of Domino's Pizza CEO Don Meij has led to a significant 6.26% drop in the company's stock value, further contributing to the ASX's downward trend [cef422c1].
In a broader context, the RBA's recent financial stability review indicated that while the Australian economy is currently robust, there are potential risks associated with maintaining high interest rates. The review emphasized the importance of monitoring economic conditions to ensure financial stability amidst ongoing uncertainties [fc7cac33]. As the RBA navigates these challenges, the implications of its monetary policy decisions will be closely watched by investors and economists alike, particularly as the Australian economy faces pressures from both domestic and international fronts [bdb62570].