Homeowners breathed a sigh of relief this afternoon, following the Reserve Bank of Australia (RBA)'s decision to continue its cash rate pause.

The 4.35% cash rate has remained unchanged since November 2023, and unchallenged by four RBA board meetings since this date including those in December 2023, and February and March this year.

Today's cash rate meeting also marks the second anniversary of the nation's rate hiking cycle and the 13 cash rate rises experienced between 2022 and 2023.

While most financial experts, including the Big Four Banks, correctly forecast today's RBA pause, there was some uncertainty in the market about such forecasts.

A cash rate hike was a possibility due to the consumer price index (CPI) reaching 3.6% in the 12 months to the March 2024 quarter, according to the Australian Bureau of Statistics (ABS).

While the ABS noted this figure marked the fifth consecutive quarter of lower annual inflation since the 7.8% peak in the December 2022 quarter, it is still far above the RBA's prime 2%-3% target.

Hence, the RBA's now well-known phrase "inflation continues to moderate" was repeated today in its press release; however, inflation is falling more gradually than expected.

Other well-known RBA phrases repeated today include:

"Conditions in the labour market have eased over the past year, but remain tighter than is consistent with sustained full employment and inflation at target."

"Inflation is still weighing on people’s real incomes (and) household consumption growth is weak".

And of course, one of RBA's most oft-repeated phrases: "The outlook remains highly uncertain".

Certainly, "returning inflation to target within a reasonable timeframe "is the central bank's main priority - and although of course, the RBA board is "not ruling anything in or out", it remains "resolute in its determination to return inflation to target".

Target range predictions change

The central bank's prediction of when inflation will reach its target range of 2%-3% has now pushed out well beyond those of even May 2023.

A year ago, the RBA forecast that inflation would reach 4.5% in 2023 and 3% in mid-2025; now, it predicts the country will reach the 2%-3% range in the latter half of 2025.

Today, the RBA also noted that Australians should expect inflation to be higher in the short term due to rising domestic petrol prices, and higher-than-expected services price inflation.

The RBA said this latter issue - which it warned the nation about in its March 2024 cash rate announcement - is forecast to decline more slowly than expected over the rest of 2024.

In the RBA's media conference today, governor Michele Bullock said the RBA was trying very hard to slow the inflation rate while maintaining employment growth and not tipping the nation into recession.

For the first time since January 2022, Australia's unemployment rate reached 4.1% in January 2024, according to ABS figures.

However, similar to January 2022 and 2023, this increase coincided with a higher-than-usual number of unemployed people who were about to start, or return to, work in the future.

"(Inflation remaining high) is frustrating but I feel that we're on the right path," Ms Bullock said today.

15th consecutive month of price growth

CoreLogic executive research director Tim Lawless said today that the cash rate outlook has now changed - and in a short space of time as well - thanks largely to the higher-than-expected inflation figures for the March quarter.

"The RBA took a slightly dovish tilt at their March meeting (but) ... this newly adopted neutral stance didn’t last long, with the RBA taking a more cautionary tone at (today's) meeting..." Mr Lawless said.

"The ‘last mile’ of getting inflation back to the target range of 2-3% is shaping up to be a challenge, especially in the ‘stickier’ areas of service and non-discretionary inflation..."

And still, house prices continue to lift, Mr Lawless said, with this area experiencing its 15th consecutive month of growth in April.

"Demonstrated demand is continuing to track higher than a year ago and above the decade average for this time of the year," he said.

Mr Lawless pointed to short housing supply as the main reason for such growth amid high interest rates, the ongoing cost of living pressures, high cost of debt, stretched affordability and low sentiment.

"It’s a timely reminder that interest rates are only one factor that influences housing prices and activity," he said.

"Although the pace of growth in dwelling values ... has slowed since the middle of last year, the outlook for values generally remains positive until the supply/demand dynamic rebalances ... and a material supply response seems some way off.

"Other hurdles to delivering a supply response include tight margin pressures for builders following a surge in input costs through the pandemic, skilled labour and trade shortages, rising labour costs and high funding costs."

The RBA’s next monthly cash rate announcement will be on Tuesday, June 18 at 2.30pm AEST. This will be followed by announcements in August, September, November and December.