SYDNEY — The Reserve Bank of Australia held its official cash rate at 4.35 percent, a unanimous decision that extends the pause after three increases earlier this year.
Australian bond yields fell following the decision as markets priced out near-term tightening and reduced short-end duration risk. The Australian dollar also declined.
The RBA board acknowledged inflation remains elevated at 3.8 percent year-over-year through June — 130 basis points above the central bank's 2.5 percent target midpoint — with price growth not expected to return to target until late 2027.
Despite the hold, the RBA warned it would hike further if "upside risks materialize," adding that it "will continue to do what it considers necessary to bring inflation sustainably back to target."
Stephen Smith, a partner at Deloitte Access Economics, said the RBA "increasingly feels its job may be done" but added that "another rate rise in 2026 cannot be fully ruled out."
The RBA projects growth at about 1.4 percent over 2026, with higher population growth offset by falling home prices. Household spending is expected to weaken as declining property values erode wealth and depress transaction volumes.
ANZ economists forecast capital city home prices will fall at least 5 percent from their early 2026 peaks, with Sydney projected to drop 14.5 percent and Melbourne 12.8 percent. RBA research suggests federal budget tax reforms could push house prices down an additional 5 percent over the long term.
Treasurer Jim Chalmers said the decision was "a relief to Australians with a mortgage" during a period of global economic uncertainty.
