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RBA Expected to Keep Rates on Hold Amid Inflation Concerns

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Experts are predicting that the Reserve Bank of Australia (RBA) will maintain interest rates at their current level during the conclusion of its May meeting today. The decision is anticipated to be announced at 2.30pm (AEST), alongside the release of updated economic forecasts by the RBA.

In the days leading up to the two-day meeting, economists were largely in agreement that the official cash rate would remain unchanged at 4.35 per cent, a level that has been in place since last November.

Despite the general consensus on a hold decision, concerns have been raised due to persistent inflation figures, hinting that mortgage borrowers might face further challenges in the near future. The consumer price index rose by 3.6 per cent in the 12 months leading up to March, surpassing the RBA’s projected 3.5 per cent and exceeding the 2.5 per cent target set for 2026.

Former RBA governor Philip Lowe has cautioned about the inflationary threats looming over the Australian economy. Lowe emphasized the uncertainty surrounding interest rates, stating that it may be premature to assume that the peak has been reached. He underlined the bi-directional risks involved, acknowledging the public’s desire for rates to have reached their pinnacle while reminding them that the situation remains fluid.

The upcoming RBA board meeting holds particular significance as it represents the final gathering before the federal budget is unveiled next week. With economic indicators signaling a potential spike in inflation, the RBA’s decision today could have lasting implications for Australia‘s financial landscape.

Rachel Adams

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