RBA Board keeps interest rates on hold again as high inflation digs in

In a widely predicted move, the Reserve Bank of Australia board decided to keep rates on hold at its meeting this afternoon.

In a statement, the board said the cash rate will remain at 4.35 percent, while the interest paid on exchnage settlement balances will also be unchanged at 4.25 percent.

The RBA noted that while inflation has fallen since its peak in 2022, the rate of inflation is still outside the board’s target range of between 2 and 3 percent.

“In underlying terms, as represented by the trimmed mean, the CPI rose by 3.9 percent over the year to the June quarter, broadly as forecast in the May Statement ob Monetary Policy,” the board said. “But the latest numbers also demonstrate that inflation is proving persistent.”

Noting that the economic outlook is uncertain and the road to a more manageable rate of inflation is slow and bumpy, the RBA board now predicts that the 2 to 3 percent rate is more likely to take at least another 12 months. The board has repeatedly stated its resolve to bring inflation to heel since it hit a high of 7.8 percent in December 2022.

“This represents a slightly slower return to market than forecast in May, based on estimates that the gap between aggregate demand and supply in the economy is larger than previously thought,” the board said. “In part, this reflects an increase in the forecast for domestic demand. But it also reflects a judgement that the economy’s capacity to meet that demand is somewhat weaker than previously thought, evidenced by the persistence of inflation and ongoing strength in the labour market.”

Research director at CoreLogic Asia Pacific, Tim Lawless, said the decision was unlikely to impact housing demand.

“Although a stable interest rate decision is seen as a positive for borrowers and housing more broadly, we aren’t expecting today’s outcome will have a material influence on housing trends,” Mr Lawless said. “While stable rates and lower inflation should help to lift consumer sentiment, which has historically shown a close relationship with property sales, the August hold decision may not be enough to see that rise in consumer sentiment flow through to housing market activity.

“Recent growth in property prices has had more to do with low supply, tight rental conditions and demographic factors than sentiment through the housing upswing to date.”

He pointed out that other factors, including ongoing problems with housing affordability and slowing migration were more likely influencing easing property prices.

“Even if sentiment lifts, an improvement in affordability barriers or strengthening in household balance sheets isn’t likely until interest rates start to fall,” he said.

The RBA board is expected to meeting again in six week’s time.

Australian shares fell on Thursday as Wall Street weakness, rising oil and persistent rate concerns weighed on most of the market.

The S&P/ASX 200 declined 0.72 per cent to 8,702. The All Ordinaries lost 0.66 per cent to finish at 8,897. Mining stocks were hit particularly hard, while real estate also dragged on the index.

Energy was the notable exception, gaining more than one per cent as Brent crude traded above US$103 a barrel. Oil had moved higher amid uncertainty surrounding potential US diesel-export restrictions and broader geopolitical supply risks. The move supported energy producers but renewed concern about inflation inputs across transport and the wider economy.

Gold shares were weak even as spot bullion remained historically elevated. The All Ordinaries Gold index fell about 2.25 per cent, showing that equity performance can diverge from the commodity because of valuation, currency, operating and company-specific factors.

Zip was a prominent loser, falling 11.38 per cent after the company reported short sales after the previous close. Nine Entertainment also weakened after UBS analysts warned of near-term revenue challenges associated with its advertising-supported subscription tier.

Premier Investments led larger winners despite caution about the retail environment. Breville, in which Premier owns a significant stake, also appeared among leading movers. In the broader ASX 300 screen, Myer gained 11.43 per cent and MAAS Group rose 7.93 per cent, while Lotus Resources fell 10.53 per cent. These percentage moves should be checked against company announcements and trading liquidity before attributing causes.

The Australian dollar was broadly flat at US70.38 cents. Spot gold was around US$4,280 an ounce, Brent crude approximately US$103.08 a barrel and iron ore near US$96.90 a tonne late in the session.

The rate outlook remains the central domestic catalyst. Labour-market weakness has not eliminated the possibility of an RBA increase next week, leaving banks, listed property and other rate-sensitive sectors exposed to changing expectations.

Market dashboard

S&P/ASX 200: 8,702, down 0.72 per cent.

All Ordinaries: 8,897, down 0.66 per cent.

Best sector: Energy, up more than one per cent.

Weakest areas: Real estate and materials were the major drags; confirm final sector percentages before publication.

Material winner: Premier Investments led the large-company gainers. Confirm its final closing move from the ASX before publication.

Material loser: Zip, down 11.38 per cent.

ASX 300 percentage leader: Myer, up 11.43 per cent.

ASX 300 percentage laggard: Zip, down 11.38 per cent.

AUD/USD: Approximately US$0.7038, broadly flat.

RBA Board keeps interest rates on hold again as high inflation digs in

While good news for borrowers, it is unlikely to impact on demand for housing, industry expert says