At 2:30pm AEST, the S&P/ASX 200 Index (ASX: XJO) was up 0.3% at 9,257.2 points.
That's right when the Reserve Bank of Australia (RBA) released its latest interest rate decision.
With inflation coming off the boil and the labour market showing some signs of weakness, the market had priced in a virtually 0% chance that Australia's central bank would increase (or decrease) rates today.
And the market was proven correct, with the RBA board unanimously voting to keep Australia's official cash rate on hold at 4.35%.
While that decision was widely anticipated, it still comes as welcome news to mortgage holders and ASX 200 investors alike, following on three interest rate hikes earlier in 2026.
Indeed, in the minutes after the RBA's announcement, investors sent the ASX 200 up another 0.3% to 9,280.2 points. If it can hold those gains, or more, to close that will mark a new record closing high for the benchmark Aussie index.
Here's what the RBA board had to say about today's decision to hold.
Image source: Getty Images
ASX 200 lifts on RBA interest rate hold
Commenting on the decision to hold interest rates at 4.35%, the RBA board said:
Financial conditions have tightened in response to three increases in the cash rate target this year. Money market interest rates and government bond yields have risen, and the exchange rate has appreciated. There are signs that consumer spending growth is slowing gradually as expected, while growth in business debt and investment is strong.
Momentum in the housing market has shifted, with housing prices falling in some capital cities and new housing loans declining noticeably. Labour market conditions have eased by a little more than expected in recent months. Labour market leading indicators point to only limited easing in the near term.
However, in cautionary note to mortgage holders and ASX 200 investors, the board noted that "inflation is likely to remain high for some time".
According to the RBA:
While the impact of the Middle East conflict on inflation has so far been less than expected, headline inflation is still too high. Trimmed mean inflation also remains elevated and is little changed from the March quarter.
Oil and most related commodity prices remain higher than they were prior to the Middle East conflict. Some firms experiencing cost pressures are increasing the prices of their goods and services and others are looking to do so. Short-term measures of inflation expectations have eased but remain higher than earlier in the year.
What now for Aussie interest rates?
While few analysts are forecasting another imminent interest rate hike from the RBA, ASX 200 investors and mortgage holders should be prepared for rates to remain elevated for some time yet.
Commenting on the RBA's decision, Josh Gilbert, lead analyst for APAC at eToro, said:
The case for sitting still keeps stacking up. Inflation undershot the RBA's own forecasts, unemployment surprised on the high side and the housing downturn is now doing some of the bank's work for it, with national home values falling 0.7% in July, the sharpest monthly drop since late 2022.
However, Gilbert cautioned that ASX 200 investors aren't entirely out of the interest rate hiking woods yet.
He noted:
Household spending rose 0.8% in June when markets had pencilled in just 0.2%, a second straight monthly gain driven by cars, travel and entertainment. That's hardly the picture of an economy buckling under three rate hikes, and it's the main reason the board is likely to keep a hike on the table even as it holds.
Gilbert concluded, "The hiking cycle looks done, but rates aren't going anywhere in a hurry, and anyone waiting for cuts may be waiting for a while."
