RBA says effects of monetary policy yet to be realised

The news: The Reserve Bank board considered hiking rates again at its September meeting but decided against it because the full effects of tighter monetary policy are likely not reflected in the data they rely on.

The numbers: The board left the cash rate target unchanged at 4.1% in September for a third consecutive month.

The context: The RBA observed headline inflation continued to ease in most economies because of lower food and energy commodity prices than the year earlier. It noted many central banks in advanced economies expected inflation to moderate and return to target in 2025. A sharp increase in fuel prices in August alone would boost headline inflation for the quarter but overall inflation was expected to moderate over the second half of the year. Members also noted the stress in China's property sector had potential implications for the broader economy and financial system there.

Domestically, the average outstanding mortgage rate in Australia is now higher than several other peer economies, with aggregate payments set to increase as more borrowers with fixed rate loans roll off onto higher rates. The central bankers said interest rates had been increased significantly but the effects of tighter monetary policy were yet to be fully realised and there was a lag in the full effects of tightening since May 2022 in the data.