RBA holds cash rate steady at 4.35 per cent, focused on inflation control

The Reserve Bank of Australia (RBA) has decided to maintain the official cash rate at 4.35 per cent, as widely anticipated by market observers. This decision comes as the RBA continues its efforts to bring inflation back within the target range of 2-3 per cent.

Recent data for the June 2024 quarter shows inflation easing from its peak but still hovering at 3.8 per cent, remaining above the RBA’s comfort zone. Earlier this month, RBA Governor Michele Bullock reiterated the central bank’s cautious stance, stating, "The Board remains vigilant to upside risks to inflation and has noted that monetary policy will need to remain sufficiently restrictive until it is confident that inflation is moving sustainably towards the target range."

Bullock also signalled that if economic conditions evolve as expected, a rate cut in the near future remains unlikely. The last adjustment to the cash rate occurred 10 months ago, when it was increased in November 2023.

Eleanor Creagh, Senior Economist at PropTrack, explained that today’s decision reflects the RBA’s strategy of balancing inflation control with risks to economic growth and the labour market. "The RBA’s pause highlights their intention to keep inflation on track while being mindful of the downside risks to growth and employment," she said.

Although employment growth has remained robust, with the unemployment rate holding steady at 4.2 per cent in August, Creagh noted that the labour market has softened over the past year.

Despite higher interest rates, home prices continue to rise, with PropTrack’s Home Price Index indicating a new national record in August. A potential rate cut in early 2025 is expected to stimulate buyer activity, which could further drive home prices as demand outpaces supply.