Finally, an interest rate reprieve – but a ceasefire in the Middle East doesn’t have the RBA popping champagne yet

‘I want to be very clear that inflation remains too high’ … Michele Bullock speaks to the media after Tuesday’s RBA rate decision. Photograph: Dean Lewins/AAP View image in fullscreen ‘I want to be very clear that inflation remains too high’ … Michele Bullock speaks to the media after Tuesday’s RBA rate decision. Photograph: Dean Lewins/AAP Analysis Finally, an interest rate reprieve – but a ceasefire in the Middle East doesn’t have the RBA popping champagne yet Patrick Commins Economics editor Governor Michele Bullock delivers a strong message after the Reserve Bank holds the cash rate at 4.35%, ending a run of three rises RBA interest rates: Reserve Bank holds official cash rate at 4.35% Get our breaking news email , free app or daily news podcast It will take more than a ceasefire in the Middle East to prevent the Reserve Bank from hiking interest rates again. That was the strong message from the RBA governor, Michele Bullock , after the central bank held its cash rate at 4.35%, putting an end to a run of three increases. Higher borrowing costs have been “tough” on households, Bullock conceded during her regular post-meeting press conference, but there could be no let-up in the battle to (eventually) get consumer price growth into the 2-3% target range. So yes, things are tough – but they would get much tougher if inflation was left to run rampant, she reminded us for the umpteenth time. Prices were rising too quickly even before the US and Israel attacked Iran at the end of February and triggered the closure of the world’s most important oil shipping route, the strait of Hormuz. “I want to be very clear that inflation remains too high,” Bullock said. “Today’s decision does not rule out further tightening in monetary policy if that is what is required to bring inflation down.” Sign up for the Breaking News Australia email Still, for all the tough talk, financial markets are not convinced the RBA will need to go again, putting the probability of a hike by year’s end at a little over 50%. Economists are roughly split on whether interest rates will need to rise again, and the governor’s comments did nothing to change anybody’s mind. The economy slowed markedly at the start of the year, and interest rates are contributing to that slowdown. 2:40 RBA interest rates: governor Michele Bullock explains decision to hold cash rate at 4.35% – video Unemployment has jumped to 4.5% – its highest since late 2021 – and is set to push a bit higher. Consumer confidence is at around its lowest levels on record; we are as pessimistic as we were during the height of the pandemic. Rising unemployment and slowing growth suggests lower interest rates, or at least no more hikes. Inflation at 4.2%, however, argues the opposite – and hence the difficult terrain the RBA is trying to navigate. Then there’s geopolitics. Jim Chalmers is putting a positive spin on the economy, but is Australia’s outlook grim? Read more Global oil prices have retreated to three-month lows of