The S&P/ASX 200 Index (ASX: XJO) was down 0.7% at 8,830.3 points at 2:30pm AEDT today.
Which was when the Reserve Bank of Australia (RBA) reported on its latest interest rate decision.
In the wake of that announcement, the ASX 200 edged higher to be down 0.6% at 8,840.5 points at the time of writing.
Here's what's happening.
ASX 200 edges higher as RBA holds tight on interest rates
In a move that was widely expected following last week's shock uplift in inflation, the RBA board today announced that it was leaving Australia's official cash rate on hold at 3.60%.
With some pundits having flagged a potential interest rate hike today, investors may be breathing a bit easier now, helping to lift the index.
The last time mortgage holders and ASX 200 investors enjoyed any interest rate relief was on 12 August, when Australia's central bank cut the official rate by 0.25% to the current 3.60% in a unanimous decision.
At the central bank's most recent 30 September meeting, the board also opted not to lower interest rates amid concerns that inflation was not fully under control. And those concerns proved to be valid following last week's inflation report from the ABS.
"Inflation has fallen substantially since the peak in 2022, as higher interest rates have been working to bring aggregate demand and potential supply closer towards balance. More recently, however, inflation has picked up," the RBA noted today.
Commenting on the uplift in prices that's delaying rate cuts for ASX 200 investors, the RBA said:
Trimmed mean inflation was 1.0% in the September quarter and 3.0% over the year, up from 2.7% over the year in the June quarter. This was materially higher than expected at the time of the August Statement on Monetary Policy. Headline inflation rose sharply to 3.2% over the year in the September quarter, a large part of which was expected given the cessation of electricity rebates in a number of states.
The board noted some of the increases in Australia's underlying inflation in the September quarter were due to temporary factors.
The RBA also said that labour market conditions remain a little tight, notwithstanding a recent easing. The RBA added that, "Housing prices are rising and dwelling construction costs have also started to increase again after a period of weak growth."
When might we expect the next interest rate cut in Australia?
Looking ahead to when ASX 200 investors and mortgage holders might get some interest rate relief, the RBA said that the central forecast from its November Statement on Monetary Policy is based on a technical assumption of one more rate cut in 2026.
This assumes that underlying inflation rises above 3% in coming quarters before falling back to 2.6% in 2027.
"The board is focused on its mandate to deliver price stability and full employment and will do what it considers necessary to achieve that outcome," the RBA concluded.
