The RBA keeps the interest rate unchanged

The RBA keeps interest rates unchanged

During today's RBA meeting, the central bank has decided to maintain the interest rate at 4.1% for the third consecutive month. However, leaving the door open to continue its tight monetary policy for a longer period to control inflation.

Despite the interest rate remaining unchanged, it is still stable near its highest levels since April 2012. This marks the fourth temporary maintenance of the interest rate since the bank began its monetary tightening in May 2022.

Tuesday's board meeting also served as the last meeting chaired by Philip Lowe, the Governor of the Reserve Bank of Australia, whose seven-year term ends next week. Michelle Bullock, the current Deputy Governor of the Reserve Bank of Australia, is scheduled to assume her role on September 18.

Most expectations leaned towards keeping the interest rate unchanged in this morning's meeting, as the Reserve Bank of Australia has successfully managed to control inflation, albeit at a slow pace. The current inflation rate stands at 4.9% in July, while the bank targets an inflation range of 2% to 3%.

Following the decision, Governor Lowe stated that it is expected for inflation to return to the target range by late 2025, and it is projected that unemployment will gradually rise to 4.5% by late 2024.

Asian stocks decline on the back of inflationary concerns

Asian stocks declined, led by a fall in Chinese stocks amid ongoing worries about slowing growth and the collapse of the real estate sector. Furthermore, concerns regarding future inflation hikes have heightened expectations of continued monetary tightening by central banks, consequently exerting pressure on global stock performance.

Chinese stocks exhibited the poorest performance during the day, as investors demonstrated risk aversion due to policymakers' delay in implementing further expansionary measures. Additionally, a special survey revealed that China's service sector activity grew less than anticipated in August, as the slowdown in external demand added to the pressures stemming from weak domestic spending.

Both the CSI 300 and Shanghai Composite indices declined by approximately 0.6%, while the Hang Seng Index in Hong Kong dropped by 1.5% as investors took profits from real estate and technology stocks.