RBA interest rates: Cash rate on hold at 3.6 per cent after inflation bounce

Reserve Bank boss Michele Bullock has signalled further interest rate cuts are unlikely for six months — or much longer — amid concerns that inflation is rising back from the dead.

The RBA held the cash rate at 3.6 per cent in a unanimous decision on Tuesday, ending this year’s cycle of cuts every three months.

New forecasts from the central bank showed core inflation — the RBA’s preferred measure of prices as it strips out volatility — would be above target until mid-2026.

That will deal a major blow to hopes for mortgage relief next year.

Ms Bullock pointed to difficulty securing tradies as an example of how demand in the economy remains stronger than thought.

Inflation in housing and the services sector were expected to remain problems.

“It’s possible that there’s no more rate cuts. It’s possible there’s some more,” she told reporters in Sydney.

“But we didn’t go up as high (as other countries) we may not have to come down as far.

“We’re at the right spot we need to be at the moment. We can respond where the risks arise.”

Yet her tone suggested the RBA was more worried about inflation than the recent modest rise of unemployment, making another rate cut less likely.

She said the jobs market has “eased” but remains “a little bit tight” and unemployment was close to historical lows.

Economists warned borrowers to rein in hopes of further rate relief for at least six months.

“The chance that the RBA will cut when core inflation is rising and above target is close to zero,” HSBC’s Paul Bloxham said.

EY’s Cherelle Murphy said “there may be no more rate cuts in the current cycle at all”.

Also tipping the RBA would hold for the foreseeable future was Moody’s economist Sunny Kim Nguyen. She said the RBA had made a “killer admission” rates may already be too low.

“The RBA needs to see inflation falling convincingly — actually falling, not just forecast to fall — before it moves again,” Ms Nguyen said.

“It is highly unlikely to hike again, given the political and communication costs of reversing course.

“What’s left is a holding pattern while the board hopes temporary factors really are fleeting, private demand moderates on its own, and productivity somehow improves.”

The numbers also sparked heated debate in Canberra with Liberal shadow treasurer Ted O’Brien arguing the government’s “spending spree left the RBA with no room to move today”.

But Treasurer Jim Chalmers was quick to point out the cost of living crisis has eased since 2022.

“Inflation is much lower than we inherited, that has given the Reserve Bank the confidence to cut interest rates three times this year, and that reflects the substantial progress we’ve made together in our economy,” he said.