RBA Keeps Rates on Hold While Leaving Door Open for Further Tightening

The Reserve Bank of Australia left its cash rate unchanged at 4.35% for a second consecutive meeting, citing an economic slowdown that remains broadly in line with its expectations.

A softer-than-expected rise in Australia’s second-quarter inflation also supported the central bank’s decision to keep policy settings unchanged this month.

While some policymakers argued in favor of additional tightening following the RBA’s cumulative 75 basis points of rate increases this year, the Board ultimately opted to remain on hold. Nevertheless, Governor Michele Bullock maintained a hawkish tone during the post-meeting press conference, signaling that further rate hikes remain a possibility after the three increases delivered since January 2026.

The tightening measures implemented this year have fully unwound last year’s policy easing, as higher energy prices have continued to fuel inflationary pressures and weigh on economic activity, prompting the RBA’s response.

Governor Bullock reiterated that returning inflation to the target range remains the central bank’s primary objective. She also highlighted the growing risk of a further escalation in the Middle East, warning that persistently elevated oil prices could intensify inflationary pressures globally and potentially require additional policy tightening in Australia.