ASX 200 jumps back into the green as RBA keeps interest rates on hold

At 2:30pm AEST, the S&P/ASX 200 Index (ASX: XJO) was down 0.3% at 8,891 points ahead of the Reserve Bank of Australia (RBA)’s latest interest rate decision.

And, as widely expected, the RBA opted to keep the official cash rate on hold at 4.35%.

In the minutes that followed that announcement, investors favoured their buy buttons, sending the ASX 200 up 0.4% and back in the green for the day at 8,915 points.

While the market had widely priced in an RBA interest rate hold today, following three consecutive hikes at each of the central bank’s previous meetings in 2026, confirmation of those expectations was clearly welcomed.

Here’s what the RBA board had to say.

ASX 200 investors relieved on RBA interest rate pause

Sounding a cautionary note, the RBA said:

Inflation picked up materially in the second half of 2025, and information since the beginning of this year confirms that some of the increase reflected greater capacity pressures. The latest data show that headline and underlying inflation are still too high.

Fuelling ongoing inflation and potentially seeing ASX 200 investors endure another interest rate hike later this year, the RBA said, “There are signs that some firms experiencing cost pressures are increasing the prices of their goods and services and others are looking to do so.”

Positively, in terms of inflationary pressures, the RBA noted, “There are signs that growth in consumer spending is slowing as expected and momentum in the housing market has shifted, with housing prices falling in some capital cities.”

The board added that while the unemployment rate was higher than expected in April, other measures of labour market conditions have been more resilient.

Looking at what ASX 200 investors might expect ahead, the board said:

As expected, the disruption to global oil supply is having an impact on inflation. Higher fuel prices have added directly to inflation and there are indications that this is passing through to the prices of other goods and services, so inflation is likely to remain high for some time.

This inflation impulse is in addition to the high inflation recorded around the start of 2026, reflecting capacity pressures in the economy.

What are the experts saying about the RBA interest rate pause?

Commenting on the RBA’s interest rate and inflationary dilemma, Josh Gilbert, lead analyst for APAC at eToro, said:

After three hikes already this year, the board is caught between stubborn prices and a softening economy, and April’s inflation data showed just how little breathing room it has. Trimmed mean inflation ticked up to 3.4% and remains above the top of the RBA’s 2-3% target band, while the headline rate of 4.2% is still well above where the board needs it to be…

With consumer confidence tumbling again last week, households will be hoping this hiking cycle is over for now.

Carl Ang, fixed income research analyst at MFS Investment Management, added:

The RBA baseline is for prolonged stability at the current 4.35% policy rate with risks to the outlook still tilted to the upside. Potential triggers for further tightening include underlying inflation persistence above the RBA’s target as well as growth resilience like labour market stability or a consumer spending rebound…

So, when might ASX 200 investors expect some interest rate relief?

According to Ang:

Looking further ahead, H2 27 seems like the earliest for RBA rate cuts but given recent inflation overshooting any rate reductions are likely to be measured and towards neutral levels likely more than 3.5%.

The post ASX 200 jumps back into the green as RBA keeps interest rates on hold appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.