RBA holds cash rate at 4.35% amid inflation and housing market shifts
Consensus Summary
The Reserve Bank of Australia (RBA) unanimously decided to hold the official cash rate at 4.35% following a two-day board meeting, despite warnings that inflation remains elevated at 3.8% in the year to June. Both the Guardian and ABC confirm the RBA’s decision to pause rate hikes for now, though the bank retains the option to increase rates further if inflation risks materialize. The RBA’s latest forecasts suggest inflation may return to its 2.5% target by late 2027 or early 2028, with a more optimistic outlook than previous projections. House prices have declined significantly since their peaks early this year, with Sydney and Melbourne experiencing drops of 14.5% and 12.8% respectively, while borrowers have largely managed rising rates by building repayment buffers. The next RBA meeting is scheduled for September 28-29, with the cash rate expected to remain unchanged until then. While the Guardian highlights specific declines in home loan applications and long-term price impacts from tax reforms, the ABC focuses on broader inflation trends and household debt burdens, noting that mortgage repayments now consume 12% of disposable income, nearing 2024 peaks.
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Key details reported by multiple sources:
- The Reserve Bank of Australia (RBA) held the official cash rate at 4.35% after a two-day board meeting.
- The RBA warned that inflation remains too high at 3.8% in the year to June, targeting 2.5% by late 2027.
- The RBA has implemented three rate hikes earlier this year.
- Headline inflation is projected to return to the RBA’s 2.5% target by early 2028.
- House prices have fallen by at least 5% from their peaks early this year, with Sydney down 14.5% and Melbourne down 12.8%.
- Seven in eight borrowers hold a year or more worth of repayments in offset/redraw accounts.
- The RBA’s next interest rate meeting is scheduled for September 28-29.
- The RBA’s cash rate target remains unchanged at 4.35% for the next seven weeks until late September.
- House prices rose about 5% in the last year and were up 50% since 2020.
Points of Difference
Details reported by only one source:
- The RBA’s latest economic growth forecast for 2026 is 1.4%.
- ANZ economists predict capital cities’ home prices will fall at least 5% from their peaks early this year.
- Westpac reported a 20% fall in home loan applications since mid-May, attributing it to interest rate rises.
- The RBA cited research suggesting the federal budget’s tax reforms could leave house prices up to 5% lower in the long term.
- The RBA’s statement was released at 3.30pm AEST in Sydney.
- Investor loan commitments in June fell by roughly a quarter compared with the start of the year.
- Headline inflation cooled in June, with underlying inflation pressures remaining elevated.
- The RBA’s trimmed mean inflation is now 0.2% below the last forecast, with inflation expected to peak lower than previously feared.
- The RBA’s latest forecasts assume the cash rate will stay around 4.35% in December 2028, down from previous forecasts of a peak around 4.7%.
- Australian households are spending about 12% of their disposable income servicing debt, including consumer credit repayments.
- The RBA noted that scheduled mortgage repayments relative to household disposable income have increased to near 2024 peaks.
- The RBA compared current debt burdens to 2008 levels, when the cash rate was 7.25%.
Contradictions
Conflicting information between sources:
- The Guardian states the RBA’s inflation projection is 3.8% in the year to June, while the ABC does not explicitly mention this figure but notes headline inflation cooled in June without specifying the exact percentage.
- The Guardian mentions a 5% long-term house price reduction due to federal budget tax reforms, while the ABC does not reference this specific cause for price declines.
- The Guardian reports a 20% fall in home loan applications since mid-May, while the ABC does not provide a comparable figure for loan application trends.
Source Articles
RBA interest rates: Reserve Bank holds cash rate at 4.35% but threatens more hikes if needed
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