RBA Holds Rates Steady, Warns Inflation Risks Remain
The Reserve Bank of Australia (RBA) has decided to keep the official cash rate at 4.35 per cent, marking the second consecutive hold. Governor Michele Bullock emphasized that the board is prepared to act if necessary, stating, “It’s important people believe that we will act if we need to.” The decision comes as the housing market shows signs of slowing more than expected, but Bullock clarified that housing is not “the main game” in this decision. Instead, the RBA is closely monitoring strong jobs creation, tight capacity in the economy, the AI boom, and the effects of the Middle East conflict.
The RBA’s statement signals that inflation could remain high “for some time,” with predictions it will stay above the 2-3 per cent target range until mid-2027. The board highlighted the need to prevent inflation from becoming “embedded” above the target. Treasurer Jim Chalmers welcomed the hold as positive news but acknowledged there is “more work to do.” Meanwhile, Compare the Market’s economic director David Koch called the decision “right” given the “lot of stress out there” for Australians. Domain’s chief economist Nicola Powell noted that while a pause may reassure homeowners and buyers, it will do little to shift the broader housing market.
The RBA’s next meeting is in September, where it will again decide on the cash rate. Major banks predict rates will hold until next year, but the board has warned it will increase rates “if upside risks materialize.” Governor Bullock pointed to the Middle East conflict as a key upside risk to inflation. The board also noted that consumer spending growth is gradually slowing as expected, while business debt and investment remain strong.
During parliamentary Question Time, Treasurer Chalmers highlighted that this is the second rates decision since the budget, and both have remained steady. The RBA’s cautious stance reflects a balancing act between supporting economic growth and curbing inflation, with the board ready to act if necessary to ensure price stability.
Shimanta Das 
