The S&P/ASX 200 Index (ASX: XJO) started Tuesday in the green but lost ground through the day to be down 0.2% at 2:30pm AEST.
That's when the Reserve Bank of Australia released its latest interest rate verdict.
On the heels of the RBA announcement, the ASX 200 dipped 0.1% to be down 0.3% at the time of writing.
The RBA first began hiking interest rates back in May 2022 to bring soaring inflation back down to its 2% to 3% target range.
Following on a series of 13 interest rate hikes thereafter, the RBA's last increase on 8 November 2023 brought Australia's official cash rate to 4.35%.
This afternoon, investors learned that rates will remain there, at least until the RBA's next meeting on 5 November.
With the RBA's decision to hold rates steady today already widely baked into the markets, the reaction on the ASX 200 has been relatively muted.
As Sam North, market analyst at eToro, noted yesterday, "The main message on this Tuesday's rate call is that a cut is looking about as unlikely as a hike… Stronger-than-expected unemployment figures last week have almost certainly pushed rate relief for Australians into next year."
Here's what the RBA today reported today.
ASX 200 holds gains on RBA interest rate call
The ASX 200 dipped lower after the RBA board announced it would hold the cash rate at 4.35%. The interest rate paid on Exchange Settlement balances also remains unchanged at 4.25%.
The board noted that inflation has dropped "substantially" since peaking in 2022, with higher interest rates helping bring demand and supply in Australia's economy closer in line.
However, inflation down under is proving sticky and remains above the central bank's target range.
Underlying inflation, which takes out certain volatile items, came in at 3.9% in the June quarter.
The RBA said it expects headline inflation to fall further temporarily "as a result of federal and state cost of living relief".
In unwelcome news to mortgage holders and most ASX 200 investors alike, the RBA added:
Our current forecasts do not see inflation returning sustainably to target until 2026. In year-ended terms, underlying inflation has been above the midpoint of the target for 11 consecutive quarters and has fallen very little over the past year.
The RBA also again stressed the uncertainty surrounding just when inflation might return to its target.
The board said these uncertainties include ambiguities around "the lags in the effects of monetary policy and how firms' pricing decisions and wages will respond to the slower growth in the economy at a time of excess demand, and while conditions in the labour market remain tight".
It remains to be seen what will happen with interest rates and economic growth in China, the United States, and the rest of the world over the months ahead.
The board stressed that it isn't ruling anything in or out. And its members reiterated that the RBA "remains resolute in its determination to return inflation to target and will do what is necessary to achieve that outcome".
As for when ASX 200 investors might expect some rate relief, the rather unsatisfying answer is "some time yet".
According to the RBA:
While headline inflation will decline for a time, underlying inflation is more indicative of inflation momentum, and it remains too high.
The most recent projections in the August SMP [Statement on Monetary Policy] show that it will be some time yet before inflation is sustainably in the target range.
