Reserve Bank keeps interest rate at 4.35pc, in unanimous decision

The Reserve Bank has kept interest rates on hold at 4.35 per cent, in a unanimous decision. 

The move comes after headline inflation cooled a bit in June, and property prices declined by a little more than anticipated in recent months.

But it also comes as economists warn that underlying inflation is still too high, with some saying that they expect interest rates to have to rise again, at some point, to squeeze inflation out of the economy.

Following today’s decision, the cash rate target will remain at 4.35 per cent for the next seven weeks, until the RBA Board’s next meeting in late September.

In a statement, the RBA’s Monetary Policy Board said inflation was likely to remain high for some time.

“The disruption to global oil supply is adding directly to inflation and there are indications that higher fuel prices are being passed through to prices of other goods and services,” it said.

“This inflation impulse is in addition to the effect of capacity pressures in the economy.

“Following three increases in the cash rate target since the beginning of the year, financial conditions are now tighter than they were, and the economy appears to be slowing as expected. 

“But inflation is still too high. It is not expected to return to around the midpoint of the target range until late 2027 and there are upside risks to this projection. 

“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,” it said.

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