The RBA held the cash rate at 4.35% this afternoon in a unanimous decision. However, Governor Bullock making clear that inflation is still too high and refused to rule out further hikes. Given they went with a hawkish hold, it begs the question why the board didn't just increase rates now.
This was not a pivot, Bullock went out of her way to stress that inflation is too high and kept the door more than just ajar to further tightening. The market read it the same way, still giving better than even odds for another rise before the year is out. Personally, I'm now strongly expecting an increase in August
The interesting thing was this was a unanimous vote. Just five weeks ago, the same board was near unanimous that a hike was needed. To my mind, nothing much has changed. Inflation is still far too high, the labour market is still strong, and there are still plenty of factors putting upward pressures on prices through Q3 and Q4. With real interest rates barely positive, I'm confused that the board was so convinced a hold was the right move here.
What it does provide is six more weeks of relief for households, and I expect we'll see consumer confidence and spending up through that period.