The Reserve Bank has left interest rates on hold at its first meeting of the year after inflation fell by more than expected towards the end of 2023.
It means the cash rate target remains at 4.35 per cent.
The decision to keep rates on hold had been widely anticipated, with few analysts expecting another rate hike.
However, an increasing number of economists now expect the RBA to start cutting rates in the second half of this year as inflation continues to moderate.
Inflation was running at an annual pace of 4.1 per cent in the December quarter, down from 7.8 per cent 12 months earlier.
Anneke Thompson, chief economist at CreditorWatch, said the RBA’s decision was made alongside a wealth of data pointing to both slowing inflation and a slowing economy.
“At 4.1 per cent, the December inflation figure is still too high for the board to consider a rate cut today, however, all indicators point to inflation falling faster than last year’s forecasts, and this may well result in a decrease to the cash rate some time in the middle of the year, rather than the latter half,” she said.
“Inflation is also falling rapidly in major overseas economies, and central banks in the US, UK and Europe are likely to consider cuts to their interest rates over the next few months,” she said.
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