RBA Holds Cash Rate at 4.35% Amid Ongoing Inflation Concerns

The Reserve Bank of Australia (RBA) has decided to keep the cash rate at 4.35 per cent, giving homeowners a reprieve from further mortgage pain. This decision was widely predicted by financial experts, including those at all four major banks, following last month's inflation figures coming in lower than expected.

The consumer price index (CPI) was 3.8 per cent in June, above the RBA's target of between 2 and 3 per cent but significantly lower than predicted. Governor Michele Bullock reiterated that future hikes would remain on the table as long as inflation remained above target, citing that inflation is expected to remain above target until late 2027.

The RBA is monitoring economic factors such as falling house prices and a softening labour market, which may indicate that the three hikes to the cash rate in the first half of the year have been effective in restricting growth in the economy. Bullock emphasized that the board wants to assess whether the economy is evolving as expected before making further decisions.

Economic experts agree that the RBA can afford to wait for more evidence rather than risk weakening the economy and labour market. The hold on interest rates also provides some reassurance for those looking to buy, but borrowing capacity remains tight, and sellers may need to be realistic on price.