RBA holds cash rate at 4.35%, drops easing bias as inflation proves sticky

The Reserve Bank of Australia held the cash rate at 4.35% on Tuesday, in line with market pricing, but removed the line noting the board was 'not ruling anything in or out' — a shift markets read as mildly hawkish.

Governor's statement pointed to services inflation proving more persistent than the August forecasts assumed, and to a labour market that remains tighter than levels consistent with the 2–3% target band.

Three-year government bond yields rose 7 basis points to 3.92% immediately after the decision, while the Australian dollar added a quarter of a cent against the greenback.

Money markets now price the first cut for the second half of next year, pushing out earlier expectations by roughly one meeting.

'This is a board that wants more quarters of data before it moves,' said one fixed-income strategist. 'The bar to cut has gone up, not down.'

Attention now turns to the quarterly CPI print, which will shape whether the RBA's central forecast for inflation returning to target by mid next year still holds.