Reserve Bank of Australia keeps rates unchanged but signals possible further policy tightening

Reserve Bank of Australia kept its cash rate unchanged at 4.35% for a second straight meeting, arguing its decision by the economic slowdown being in line with expectation.

Weaker than expected Australia’s Q2 inflation contributed to RBA’s decision to stay on hold this month.

Although some board members favored further tightening after the RBA raised interest rates by 75 basis points this year, the central bank opted to stay on hold this time, but Governor Michele Bullock kept a hawkish tone at the post-meeting press conference and signaled possibility that rates may need to go up again, following three rate hikes since January 2026.

The RBA 2026 hikes have fully reversed the amount of policy easing last year, as rising energy costs continued to fuel inflation and hurt the economy, prompting the central bank’s response.

Governor Bullock stressed that the central bank’s primary target remains bringing inflation back to target but pointed to growing risk of further escalation in the Middle East which would continue to inflate oil prices and cause a domino-effect on economies through elevated inflation that may prompt RBA to hike rates again.