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RBA signals readiness to raise rates amid persistent inflation upside risks

The RBA kept the cash rate unchanged for a second straight meeting, but expects restrictive policy to keep inflation on track toward the mid-point by 2028.

Reported · Written up by our desk · Central Banks

The Reserve Bank of Australia kept the cash rate unchanged for a second consecutive meeting, with a statement that emphasized the Monetary Policy Board is prepared to increase rates from here if upside risks to inflation materialise, according to Action Forex.

In its latest assessment, the RBA noted that headline and trimmed mean inflation have come in lower than the bank expected in May, while the labour market and housing market have also been weaker. This has supported a view that monetary policy is restrictive enough to bring inflation below the target range midpoint by 2028, even as inflation risks remain skewed to the upside.

Action Forex also said the RBA is expected to maintain a hawkish tone while rates remain on hold through late 2026 and early 2027. By August 2027, the outlook shifts to the possibility of the first of three 25 basis point rate cuts, followed by additional cuts in November 2027 and February 2028.

Meanwhile, the outlet pointed to other market inputs, including a July NAB business survey that showed business conditions rising 1 point to 4 but confidence staying weak, with forward orders declining 3 points to -3. It also highlighted that US inflation data was benign, with headline prices up 0.1% and 0.2% excluding food and energy.

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