In bringing the cash rate back to 4.35%, the RBA will have essentially reversed its brief easing cycle in 2025.
In bringing the cash rate back to 4.35%, the RBA will have essentially reversed its brief easing cycle in 2025. This will then bring interest rates back to the recent peak levels seen during 2024, which followed from rate hikes during 2022 to 2023.
So much for being done with the battle against inflation, eh? Any further rate hikes after today will see the cash rate move back to levels last seen during 2011. And if it does hit the 5% threshold, that will be the highest since 2008.
Given that backdrop, it is going to be a very tricky situation for the RBA in communicating their next steps and how they are viewing the balance between high rates and the economic outlook. But for now, it’s all about taking things one step at a time. As a reminder, the RBA has already been on a hawkish tilt since the turn of the year with core inflation keeping well above their target band of 2% to 3%.