The Reserve Bank of Australia (RBA) has kept its cash rate at 4.35%, a decision that was widely expected. This follows three rate increases earlier in the year.
The announcement comes as property values have seen a steep decline in Sydney, Melbourne, Brisbane, Perth, and Adelaide. The RBA also warned that falling house prices are expected to slow income growth.
Despite the decision to hold rates, the RBA board acknowledged that inflation remains elevated, at 3.8% in the year to June. They indicated that inflation is not projected to return to the targeted 2.5% until late 2027, and noted potential upside risks to this forecast.
The RBA stated it would continue to act as necessary to bring inflation back to target, including further rate increases if upside risks materialise. Economists and financial markets had unanimously predicted no change to the cash rate following the latest two-day RBA board meeting.
New home loans have already begun to slow, with investor loan commitments in June falling by approximately a quarter compared to the start of the year. Some banks have started reducing advertised mortgage rates, which the RBA suggests reflects strong competition and efforts to maintain market share.