RBA Keeps Cash Rate at 4.35% Amid Ongoing Inflation Concerns

The Reserve Bank of Australia (RBA) has kept the official cash rate at 4.35%, giving mortgage holders a brief respite after three consecutive interest rate hikes this year.

In its latest decision, the RBA acknowledged that inflation remains above its target range of 2-3% and will not return to the midpoint until late 2027. However, it lowered its forecast for headline inflation from 4% to 3.6% by December, following a less severe-than-expected spike in oil prices.

The RBA also revised down its trimmed mean inflation forecast to 3.3% from 3.5%. Despite the easing of inflation, domestic pressures remain elevated, with non-tradeable inflation running at around 4.9% year-on-year and new dwelling construction costs rising 5.8% over the past year.

Xero economist Louise Southall said that the decision will provide some relief to small businesses already feeling the effects of higher borrowing costs and slowing consumer demand, but added that businesses continue to face elevated operating costs and higher fuel prices.