Reserve Bank holds rates at 4.35% as inflation battle drags on

The RBA has left the cash rate unchanged at 4.35%, delivering the widely expected outcome but maintaining a cautious stance on inflation. In a unanimous decision, the central bank said inflation remains “too high” despite signs that higher rates are slowing economic activity and easing cost-of-living pressures.

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Michele Bullock and the Reserve Bank today warned Aussie punters that elevated fuel prices continue to pose a risk to the inflation outlook, with higher energy costs potentially flowing through to a broader range of goods and services.

“Inflation is still too high,” the board said, adding it would leave rates unchanged while assessing the impact of previous measures and uncertainty in global energy.

The “hold” decision – the first in CY26 – comes a day after the U.S. and Iran reached a preliminary agreement to reopen the Strait of Hormuz, easing fears of further disruption to global oil supplies following months of conflict in the Middle East.

While bond markets continue to price in the possibility of another rate increase later this year, some economists argue the next move is more likely to be a cut as inflation moderates and labour market conditions soften.

The ASX 200 remained under pressure after the announcement, while traders weighed the implications for banks, retailers and other rate-sensitive sectors.

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