RBA accepted that inflation has improved, but refused to turn that improvement into a declaration that rate hikes are finished. Cash rate was left unchanged at 4.35% unanimously, yet Board described policy as only “somewhat restrictive” and explicitly kept another increase on table, saying it could still raise rates “if upside risks materialise.” That is the clearest way to read Tuesday’s decision: softer inflation bought RBA time, not an all-clear.
New forecasts make that tension unusually visible. RBA cut June 2026 headline CPI forecast from 4.8% to 3.9% and December projection from 4.0% to 3.6%. Trimmed mean was lowered from 3.8% to 3.6% for June and from 3.5% to 3.3% for December. But Board did not carry that improvement forward aggressively. June 2027 headline inflation was revised up from 2.4% to 2.8%, with December raised from 2.4% to 2.6%. Trimmed mean was only marginally lowered from 3.1% to 3.0% for June 2027 and stayed at 2.6% for December. In other words, RBA believes current inflation picture is better than feared, but still does not trust disinflation enough to bring target return materially forward.
That explains why statement retained a tightening bias despite signs economy is responding. RBA said “headline inflation is still too high”, warned higher oil costs are feeding through to other prices, and noted inflation is not expected to return to around midpoint of target band until late 2027. Yet there is also clear evidence previous hikes are biting: consumer spending is slowing, housing prices have fallen in some capitals, new housing lending has weakened and labour conditions have eased more than expected. Unemployment forecasts were lifted from 4.2% to 4.4% for June 2026 and from 4.3% to 4.5% for December, even as later GDP forecasts were nudged higher.
The technical cash-rate assumption completes picture. RBA projections are built around a market path that rises toward 4.5%, meaning forecast convergence of inflation toward target is not based on 4.35% being held forever. That is a meaningful hawkish signal. RBA is saying current rate is restrictive enough to pause and watch, but not restrictive enough to declare victory.
For markets, that means tightening bias clearly survived Tuesday’s meeting. AUD bulls did not get a fresh hike signal, but AUD bears also did not get confirmation that peak rates are firmly in place.
Summary
RBA Decision
| Item | Decision / View |
|---|---|
| Cash rate | Held at 4.35% |
| Decision | Unanimous |
| Policy stance | “Somewhat restrictive” |
| Inflation assessment | “Still too high” |
| Tightening bias | Further hike possible if upside risks materialise |
| Technical cash-rate assumption | Rises toward 4.5% |
Key Forecast Revisions
| Forecast | August SoMP | Previous |
|---|---|---|
| CPI — Jun 2026 | 3.9% | 4.8% |
| CPI — Dec 2026 | 3.6% | 4.0% |
| CPI — Jun 2027 | 2.8% | 2.4% |
| CPI — Dec 2027 | 2.6% | 2.4% |
| Trimmed mean — Jun 2026 | 3.6% | 3.8% |
| Trimmed mean — Dec 2026 | 3.3% | 3.5% |
| Trimmed mean — Jun 2027 | 3.0% | 3.1% |
| Trimmed mean — Dec 2027 | 2.6% | 2.6% |
| Unemployment — Jun 2026 | 4.4% | 4.2% |
| Unemployment — Dec 2026 | 4.5% | 4.3% |
| Unemployment — Jun 2027 | 4.6% | 4.4% |
Key Takeaways
- RBA unanimously held cash rate at 4.35%, but tightening bias clearly survived.
- Board accepted softer near-term inflation, cutting June 2026 CPI forecast from 4.8% to 3.9% and trimmed mean from 3.8% to 3.6%.
- However, RBA did not translate softer inflation into a substantially faster return to target. June 2027 headline CPI was actually revised from 2.4% to 2.8%.
- Policy was described as only “somewhat restrictive”, rather than sufficiently restrictive, while Board explicitly retained option of raising rates again if upside risks materialise.
- Technical forecast assumption has cash rate moving toward 4.5%, reinforcing that projected disinflation is not based on 4.35% being held indefinitely.
- Labour outlook weakened, with unemployment forecasts raised across near-term horizon, confirming previous tightening is already slowing economy.
- Overall message is a hawkish hold: RBA accepted better inflation data but is not yet prepared to declare tightening cycle finished.
