RBA announces cash rate target following mixed inflation data

Following its June meeting, the Reserve Bank of Australia has decided to keep the cash rate target on hold at 4.35 per cent.

Economist Paul Eslake warned that monetary policy was clearly now in restrictive territory with headline inflation a bit lower than expected in April, and the labour market softening a bit more than expected.

"None of that rules out further rate increases at some point, but it does reduce the need for a 4th consecutive rise," Eslake said.

Eslake said the Reserve Bank could wait and see how the previous rate cuts flow through to the data.

Bendigo Bank head of economics and market research, David Robertson, said while the RBA is maintaining its tightening bias, there was no need to increase the cash rate again this month after three consecutive hikes.

"The outlook remains at the mercy of developments in the Middle East and the oil price, but the next hike may not occur until around November," Robertson said.

AMP chief economist Dr Shane Oliver agreed that the three RBA hikes this year have given the RBA some breathing space to wait and gauge the initial impact of the hikes and the impact of the oil supply shocks.

Softer data on consumer spending, jobs, and house prices, along with mixed inflation data for April, supported the case for a pause in rate hikes at the June meeting, according to Oliver.

Accounting Home Loans director of sales Cullen Haynes noted that today's decision marks the first hold to the cash rate this year.

"This will provide stability for borrowers," Haynes said.

"While inflation eased slightly in April, it remains above the RBA’s preferred target range. The RBA will need to see inflation on a downward trajectory before they consider any rate cuts."