RBA interest rates: Michele Bullock’s board holds interest rates in pre-Christmas meeting

Michele Bullock has slammed the door shut on further mortgage relief, admitting the Reserve Bank is “uncomfortable” about inflation as it held interest rates steady on Tuesday.

The RBA kept the cash rate at 3.6 per cent in a unanimous decision while quashing any doubt that the run of three cuts through 2025 had come to an end.

Borrowers instead have a nail-biting wait going into the new year with the an ominous warning from the governor — the board will “take action” by hiking rates should inflation rise further and stick around.

There was “no cut on the table” at Tuesday’s meeting and cuts won’t be on the agenda “for the foreseeable future”, Ms Bullock said.

“If it does look like inflation is not coming sustainably back to the band, and it’s going the other direction, then the board will have to take action. And it will.”

She acknowledged such a move would hurt the economy but cautioned the impact of accelerating inflation would be worse.

Top of the RBA’s watch list were price rises in services, home building and durable goods.

Big bank NAB went a step further and said a rate hike in February was now a possibility — though not likely.

“The RBA has little room to absorb any further surprises without recalibrating policy,” NAB chief economist Sally Auld said.

“The economy has returned to its trend growth rate, the recovery in private demand has been stronger than expected and the inflation backdrop and near-term outlook are much less favourable than was the case three months ago.”

KPMG chief economist Brendan Rynne said the RBA made the right call.

“We believe the RBA should continue to wait for the next few months to better understand whether the recent rises in inflation are the start of an upward trend or a temporary blip that will dissipate,” he said.

A hold was widely expected for the December meeting and financial markets tip a rate hike by the end of next year.