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RBA holds cash rate, signals possible further hike on upside risks

The RBA left the cash rate at 4.35% but cut parts of its inflation forecast, while still warning headline inflation is too high and that inflation may not return near the target midpoint until late 2027.

Reported · Written up by our desk · Central Banks

The Reserve Bank of Australia kept the cash rate unchanged at 4.35% in a unanimous decision, acknowledging that inflation has improved but refusing to declare that rate hikes are done.

According to Action Forex, the RBA described policy as only “somewhat restrictive,” retained a tightening bias, and said it could still raise rates “if upside risks materialise,” framing softer inflation as giving it time rather than an all clear.

The bank’s updated forecasts show a mix of progress and hesitation: it cut its June 2026 headline CPI forecast from 4.8% to 3.9% and December from 4.0% to 3.6%, and also lowered trimmed mean for those dates. However, it revised up headline inflation for 2027, lifting June 2027 from 2.4% to 2.8% and December from 2.4% to 2.6%, with trimmed mean only marginally lower for June 2027 and unchanged for December.

Action Forex also notes that the statement warned headline inflation is still too high and that higher oil costs could filter into other prices. The RBA said inflation is not expected to return to around the midpoint of the target band until late 2027, even as it pointed to signs prior hikes are biting, including slowing consumer spending, weaker housing and lending, and eased labor conditions.

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