The official cash rate has been held steady at 4.35 per cent, delivering a welcome pre-Christmas reprieve for embattled mortgage holders and renters. In a widely anticipated decision, the Reserve Bank of Australia decided at its last meeting for the year to leave its interest rate unchanged, effectively giving borrowers a two-month holiday from the threat of higher repayments. The RBA board made its call following data showing inflation growth slowed to 4.9 per cent in October and increasing signs of the economy slowing. Household spending has fallen significantly as millions of families have cut back heavily on discretionary purchases and there are signs that the labour market, which has proved resilient for most of the year, may be starting to weaken. Treasurer Jim Chalmers said the decision was "welcome news". "The last thing that people needed at Christmas time was for another rate rise and so I think this decision...from the Reserve Bank will be met with sighs of relief right around Australia," Dr Chalmers said. But the treasurer again talked down the prospect of any further cost of living relief when the mid-year budget update is released next week, instead flagging the possibility of extra support would be consider when framing the May 2024 budget. Though interest rates will remain on hold until at least early February, there is no indication yet that they have peaked. Reserve Bank governor Michele Bullock warned that, "whether further tightening of monetary policy is required...will depend upon the data and the evolving assessment of risks". Ms Bullock said while there had been "encouraging signs" on goods inflation, services price pressures had been persistent overseas "and the same could occur in Australia". Promisingly, the central bank boss did not express concern about the acceleration in wages in the September quarter. She noted that the increase, which was driven to a significant extent by the increase in the minimum wage, had been anticipated and "wages growth is not expected to increase much further". The governor nonetheless expressed concern about a range of uncertainties in the outlook, including around household consumption, wages growth, lags in the effect of monetary policy and business pricing decisions. Abroad, she said the view was clouded by doubts around the Chinese economy and the impact of conflicts such as those in Ukraine and the Middle East. "High interest rates are working," and holding the cash rate steady would allow time to assess their ongoing effect, Ms Bullock said. But she reiterated the central bank's determination to bring inflation back within the 2 to 3 per cent target band "within a reasonable timeframe". Ms Bullock's remarks indicate the central bank remains prepared to tighten monetary policy further in the new year if underlying price pressures, particularly in the cost of services, do not ease more significantly. The next Reserve Bank board meeting is scheduled for February 5 and 6, when the central bank shifts to a new calendar of eight meetings per year, as recommended by the RBA review.
