RBA interest rates: Reserve Bank holds cash rate at 4.35% as house prices continue to fall

In a widely expected decision, the Reserve Bank of Australia holds interest rate after three hikes earlier this year

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The Reserve Bank has held the official cash rate at 4.35% but threatened to hike again if needed, as it warned falling house prices will slow income growth.

The widely expected decision comes after a steep decline in property values in Sydney and Melbourne arrived in Brisbane, Perth and Adelaide following three rate hikes earlier this year.

Economists and financial markets were unanimous in predicting no change following the latest two-day RBA board meeting.

In a statement accompanying the decision, the RBA board said that after this year’s three rate hikes “the economy appears to be slowing as expected”, but warned that it “will continue to do what it considers necessary to bring inflation sustainably back to target, including increasing the cash rate target further if upside risks materialise”.

Board members all voted in favour of holding the cash rate, even as they acknowledged that “inflation is still too high”.

At 3.8% in the year to June, headline inflation would not return towards the targeted 2.5% until late 2027 and “there are upside risks to this projection”, the board said.

“With monetary policy judged to be somewhat restrictive, the board decided to leave the cash rate target unchanged while it assesses how the economy is evolving,” the statement said.

But Stephen Smith, partner at Deloitte Access Economics, said the statement suggested the RBA “increasingly feels its job may be done”.

“However, another rate rise in 2026 cannot be fully ruled out,” he said.

The RBA warned it was ready to hike again but markets against another rate rise in the aftermath of the decision. The Australian sharemarket rose, while the Australian dollar and bond yields fell, suggesting traders expect lower interest rates in future.

The treasurer, Jim Chalmers, said Tuesday’s decision to hold was “welcome” amid uncertainty in the global economy.

“This will come as a relief to Australians with a mortgage,” Chalmers said.

Source: Read the original article on www.theguardian.com