Key facts
- The Reserve Bank of Australia (RBA) maintained its cash rate at 4.35%.
- This marks the first time this year the RBA has not raised interest rates.
- The RBA stated that inflation remains too high and further rate increases are possible.
- Economic activity has slowed, with GDP growing 0.3% in the March quarter.
- The unemployment rate rose to 4.5% in May, its highest level since 2021.
Australia's central bank held its official interest rate steady at 4.35% for the first time this year, as economic activity slows and unemployment rises. The Reserve Bank of Australia's decision comes after previous rate hikes, which have strained mortgage holders and impacted consumer spending.
Real GDP growth faltered to 0.3% in the March quarter, and unemployment reached 4.5% in May, the highest since 2021. Analysts suggest households have less savings than in previous years, making them more vulnerable to interest rate impacts.
The RBA warned it might hike rates again if needed to control inflation, stating it would do whatever necessary to bring inflation down. Global oil supply issues are expected to maintain upward pressure on energy prices and inflation, with the resolution of the conflict in the Middle East still in its early stages.
Markets had largely expected the steady outcome following a run of softer domestic data. Swaps imply around a 30% chance of a move in August, and a total tightening of 16 basis points for the year. The RBA has previously raised rates by 75 basis points since February to combat stubborn inflationary pressures.