RBA considered rate hike at June meeting but decided on 'staying the course' to curb inflation — as it happened (2024)

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Whether you've been following along throughout this wintery Tuesday or just joined us this afternoon, thank you for your company.

We'll be back to do it all again tomorrow, but if you're after more news about interest rates (or business and finance in general), here's what's coming up on The Business tonight:

• Nadia Daly unpicks the RBA's expected rates decision, and what the hawkish hold means for the central bank's future meetings;
• As the Chinese Premier caps off his Australian tour with a focus on critical minerals in WA, Rachel Pupazzoni explains what it means for our local industry;
• And ahead of Guzman y Gomez's imminent debut on the ASX, Kirsten Aiken speaks to its CEO about the company's plan to take on McDonald's and KFC.

You can catch The Business on ABC News at 8:45pm, after the late news on ABC TV, and anytime on ABC iview.

See you tomorrow!

If you're just joining us (or in case you missed it), here are the key takeaways from Michele Bullock's post-interest rates decision press conference:

• Australia is in a "really complex part" of the cycle right now to bring down inflation while keeping the economy from falling into a recession (or in other words, staying on the narrow path)
• The RBA board "did discuss the case" for a possible rate hike at its meeting, but ultimately decided it was best to stick to its current strategy
• However, there have been some elements that have raised the central bank's alert level slightly — specifically, consumption and the uptick of inflation by a fraction
• That said, the RBA reiterated that it wants to see the "full picture" of inflation in the next quarterly data, which will be released in late July for the June quarter — especially to get a better look at services inflation
• With tax cuts coming and real wages rising, the RBA says it will help boost consumer sentiment and consumer confidence, and Michele Bullock says she expects many people will put their tax cuts towards their cost of living pressures and meet everyday expenses
• The RBA also isn't expecting Australia will tip into a recession, with the governor also noting that economies overseas are also likely through the worst of the downturn
• Ultimately, the RBA says higher interest rates are having their desired effect on inflation, with Bullock stating: "We do believe it's working, but it's just going to be a slow grind to bring inflation back."

You can read more about the RBA's decision below:

The ASX 200 has finished 1% higher for the day to close at 7,778 points on Tuesday.

The rally on the local share market came after the RBA left rates steady at 4.35% for another meeting, as widely expected.

At the close of trade, education was the only sector left in the red — down 0.3%.

The strongest performances were recorded by utilities (+1.6%), financials (+1.4%) and healthcare (+1.2%), while consumer cyclicals and the interest-rate sensitive real estate sector both picked up 1.1% each.

As for the top performing stocks:

• Atlas Arteria +5.1%
• Sigma Healthcare +4.6%
• Pilbara Minerals +3.8%
• NRW Holdings +3.8%
• ALS +3.6%

While the worst performers:

• Fortescue -5.2%
• Bellevue Gold -4.8%
• Data#3 -2.8%
• Beach Energy -2.2%
• Iluka Resources -2.2%

Interest rates might be on hold again, but it doesn't make the current cost-of-living any easier for many households around the country.

If you or someone you know are struggling or experiencing financial distress, there are a number of resources and support services available and ready to help:

• National Debt Helpline: 1800 007 007
• Mob Strong Debt Help: 1800 808 488
• ASIC's Moneysmart website
• Australian Financial Complaints Authority
• Find a financial counsellor
• Lifeline: 13 11 14
• Beyond Blue: 1300 224 636

(Remember, this is general information only — please seek out a professional if you require specific financial advice.)

That's the quickest post-rates meeting press conference we've had since the RBA introduced it back in February.

We'll bring you the highlights from it shortly — in the meantime, you can watch her opening statement below:

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That's a question put to the RBA governor in the context of an economist pointing out that the European Central Bank (ECB) and Bank of England sometimes using the word "vigilance" to signal to the markets that a potential rate rise is coming — and noting that the RBA is using the word more and more in its communications.

(Specifically, she's asked about that given the RBA's deputy governor has recently joined from the BOE.)

The question elicits a laugh from Bullock, who repeats that "no", vigilance is not code for an interest rate rise.

I wanted to ask something a little left field that no-one else was likely to ask the governor. This was it:

"Governor, construction activity is still reasonably strong as projects that were already in the pipeline get completed, but there's not a lot of new work coming into the sector.

"Are you worried that this is emblematic of the broader lags in the economy in the transmission of monetary policy and that perhaps the economy might snap later this year when the downturn in new orders catches up with economic activity?"

RBA governor Michele Bullock's answer:

"So [I wouldn't use] the word snap, but you've highlighted one of the points I think that is one [that makes us] get wary.

"We talked a little bit earlier about budgets and so on as well as other things going on, and you've highlighted one of them, which is the lack of the construction pipeline.

"So it's quite possible that the private sector will turn out to be not driving demand very much in the following years. So there is a risk that that has an impact on employment.

"And, therefore, if that happens, and it does happen more quickly than we expect, then rate cuts will be on the agenda. So again, we can't rule anything in, we can't rule anything out. It will depend very much on what happens and it happens on the private side of the economy as well."

The RBA governor is asked what she would say to Australians who are struggling with higher living costs and when they might get some relief, with rates sticking at 4.35% since November last year.

"I am very conscious that the high interest rates are hurting particular sectors of the economy more than others," she says.

"The interest rate is the only tool we have, and it's a blunt instrument, and I do understand that it affects different people in different ways.

"Again, I can't tell them when we will bring interest rates down, but I can say that my laser focus and the board's laser focus is on bringing inflation down, and that will help them [Australians]. That will really help them."

Bullock confirmed that the RBA discussed potentially lifting rates, but says that the central bank didn't even consider the possibility of a rate cut today.

"No, the case for a cut was not considered," she said.

"I think I should say, because I haven't said it yet today, we're not ruling anything in or anything out at the moment.

"I wouldn't say that the case for a rate rise is increasing.

"What I would say and I think we tried to reflect this in the statement, is that there's been a few things that have made the board alert to the upside risks."

The first question asks Bullock whether the central bank considered lifting interest rates at its meeting.

"Yes, the board did discuss the case for increasing interest rates at this meeting," Bullock replies.

"In the end, it decided that its current strategy of staying the course and trying to bring inflation back down by bringing supply back to demand was the right way to go."

Michele Bullock gives a brief introduction, where she says "we're at a really complex part of the cycle" and the "narrow path" for inflation to come down without the economy slipping into recession is getting "a bit narrower".

Bullock ends her opening statement by saying that the central bank wants more information about services inflation, which is where the strength in the CPI has been coming from.

"The recent data have been mixed, but overall I think they reinforce the need to remain vigilant to the upside risks to inflation," she says

"We still think we're on the narrow path but it does appear to be getting a bit narrower.

"We need a lot to go our way if we're going to bring inflation back down to the 2% target range.

"The board does need to be confident that inflation is moving sustainably towards target, and it will do what is necessary to achieve that outcome."

This is what my view looks like at the presser.

She begins her press conference with an opening statement, and says Australia is at a "really complex part of the cycle" when it comes to bringing inflation down.

"Inflation has come down a long way since it peaked in 2022, both in Australia and overseas," she says.

"And part of this was the resolution of supply chain issues, which and also energy prices easing, which has helped.

"But it also reflects the tightening of monetary policy all around the world, and that's helping to dampen demand.

"That said, inflation is still above central bank targets in many economies and it is proving to be sticky and the progress in getting inflation down has slowed and Australia isn't any different here."

My colleague Nadia Daly just interviewed Challenger's chief economist Jonathan Kearns shortly after the rate decision was announced.

Kearns until quite recently was a senior official at the Reserve Bank.

Chatting after the interview, we both agreed that the RBA's post-meeting statement was slightly "hawkish" - that means the near term risks are skewed to a rate rise over a rate cut.

Even in the likely event that the RBA doesn't end up hiking again, Kearns can't see a rate cut coming soon.

"I think realistically it could even be as late as the middle of next year.

"If we get a couple of quarters of inflation being relatively sticky, which at the moment we're seeing, then there's a chance that they're gonna need to wait a bit longer to have that confidence that inflation really is falling persistently.

"Monetary policy in Australia hasn't been as tight as it has been in many other countries and so the Reserve Bank is probably going to have to wait long to be able to cut rates."

In his view, interest rates are not high enough to get inflation down quickly enough.

"I think monetary policy is actually probably not been tight enough in Australia. I think the RBA probably should have increased rates a little bit further, probably closer to around 5%. And because monetary policy hasn't been tightened mouth, they're going to have to wait longer to be able to get rates."

That's why he also sees a real risk rates might have to be raised again.

"They're not expecting inflation to return within target to paper for years with patient being above 3%. And so the risks to policy are certainly from inflation being stronger, which would necessitate an increase in policy rates.

"So I think there is some chance that they will actually have to increase if inflation turns out to be a little bit stronger than they expect."

Hi there, I'm jumping in with Kate to bring you the exciting atmosphere live from the bear pit - otherwise known as the press conference now held after each RBA meeting.

It's not your typical presser with journos screaming over the top of each other though. Seats are allocated by the RBA and questions taken in turn according to the seating order.

I'm about 10th in line for a question, but my colleague Nadia Daly is number two.

This is what the room looks like 15 minutes before Michele Bullock is due to arrive.

In about 15 minutes we'll hear directly from the RBA governor, Michele Bullock, about the central bank's widely predicted decision to keep rates on hold.

She'll be fielding questions (including some from reporters that loyal blog readers might recognise 👀 ) when things get underway at 3:30pm.

You can watch the press conference in full using the below livestream (or heading to the top of the blog).

Speaking to ABC News Channel earlier, EY economist Cherelle Murphy added that it's not just inflation that could force the RBA's hand on potential rate increases at its next meeting in August.

She noted that the revised stage 3 tax cuts, which come into effect on July 1, could affect consumer spending — which the RBA would take into account in its August meeting.

"Then, of course, as we look into the second-half of the year, we also have tax cuts to think about, real wages are rising again," Ms Murphy said.

"Will all of the factors together cause the consumer to actually feel better and start spending again?

"It is possible, so it's definitely not an easy time to be a central banker in 2024."

She added that global economic uncertainty — including tension in the Middle East and the war in Ukraine — are also having an impact on the RBA's outlook for inflation.

That's according to EY economist Cherelle Murphy, who was speaking to finance presenter Alicia Barry on ABC News Channel a short time ago.

With the RBA keeping rates on hold at 4.35% for another meeting, attention now turns to the August meeting — which will come after the June quarterly inflation data flows through.

Ms Murphy said if inflation remains quite strong in the June quarter, there is a chance the central bank could push rates up again.

"If it [inflation] didn't follow the path that the Reserve Bank predicts in its forecasts, and moves substantially above that, then yes — certainly, there is a risk that the Reserve Bank could hike again," she said.

"However, there are also a number of factors which, of course, might work the other way, so we're going to have to wait and see what that number looks like."

In its post-meeting statement, the RBA says that while inflation is coming down, it is at a much slower pace than it would like to see.

"Inflation is easing but has been doing so more slowly than previously expected and it remains high," the statement said.

"The Board expects that it will be some time yet before inflation is sustainably in the target range. While recent data have been mixed, they have reinforced the need to remain vigilant to upside risks to inflation.

"The path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe remains uncertain and the Board is not ruling anything in or out."

The statement adds that the board remains "resolute in its determination to return inflation to target and will do what is necessary to achieve that outcome".

As expected, the Reserve Bank of Australia has kept interest rates at 4.35 per cent for the fifth-straight meeting.

It means the central bank has left rates unchanged for seven months in a row.

The central bank hasn't increased rates since November 2023, and rates currently at their highest level since November 2011.