RBA Keeps Interest Rate Steady At 4.35% As Economic Pressures Persist

It looks like mortgage owners are left with no respite as the Reserve Bank of Australia's (RBA) has decided to keep the interest rates at 4.35% for the eighth time in a row.

The RBA announced the decision just half an hour before the Melbourne Cup, extending the interest rate impasse that has existed since Nov. 8, 2023, Nine News reported. Due to the steady rate, borrowers will have to keep waiting for relief from exorbitant interest rates.

RBA's latest decision to keep interest rates at a 12-year high of 4.35% was met with a silent market reaction, as seen by the Australian dollar's steadying around $0.6595. With the first easing completely priced in for May 2025, rate swaps show a small possibility of a rate cut before year-end, Reuters reported.

"Abstracting from these effects, underlying inflation (as represented by the trimmed mean) was 3.5 per cent over the year to the September quarter," the RBA board said. "This was as forecast but is still some way from the 2.5% midpoint of the inflation target.

"While headline inflation has declined substantially and will remain lower for a time, underlying inflation is more indicative of inflation momentum, and it remains too high," said the board in the statement. "This reinforces the need to remain vigilant to upside risks to inflation and the Board is not ruling anything in or out."

The RBA defended its move to maintain interest rates at 4.35%, citing worries that underlying inflation, at 3.5%, was still above target. In the third quarter, headline inflation decreased to 2.8%, but this was mostly because of government electricity bill refunds.

The RBA has cut its GDP prediction to 1.5% by year-end and predicted that underlying inflation won't return to target until 2026. Although a rate cut this year was improbable, many anticipate one in February or May of 2025.