The RBA holds at 4.35% again. But the door to hikes stays open.

At its August 11 meeting, the Reserve Bank of Australia (RBA) held its policy rate (the cash rate) at 4.35%. The vote was unanimous, a second straight hold after June. After three hikes earlier in 2026 — in February, March, and May — it judged that financial conditions had tightened. But the statement said "headline inflation is still too high" and made clear it would not hesitate to hike further if upside risks materialise.

Underlying inflation (the trimmed mean) also remains elevated, and cost pressures from oil and the Middle East are passing through to prices. At the same time, with rates at a "somewhat restrictive" level, signs of an economic slowdown have begun to appear — falling house prices in some cities, a decline in new housing loans, and an easing labour market. Governor Bullock has maintained a hawkish stance, saying she will "do what is necessary to return inflation sustainably to target."

The RBA hiked from 2022, peaking at 4.35% in November 2023. It then turned to cuts from late 2024, lowering the rate to 3.60% in May 2025. But inflation flared up again, and in 2026 it hiked three times in a row. In May that year the rate returned to 4.35%, and it was held there in June and August — as if it climbed down the mountain, climbed back to the same summit, and then came to a stop.

This "round trip" shows how the fight against inflation is anything but straightforward. Inflation that once came down reaccelerated on higher energy prices, undoing the cuts. The current 4.35% is the same level as the previous peak, but it differs decisively in that it was "reached again by hiking," not "reached by holding."

The Q2 CPI (consumer prices) rose +3.8% year on year, easing slightly from +4.0% in May. But the underlying inflation the RBA watches (the trimmed mean) was little changed at +3.6%, barely different from the March quarter. It remains above the top of the 2–3% target range, the reason the RBA cannot lower its guard even while on hold.

The RBA's inflation target is not a pinpoint "2%" like the US, Europe, or Japan, but a "range of 2–3%." As long as underlying inflation exceeds the top of this band, it is hard for the RBA to move to cuts. It is also a concern that oil and related commodities are staying high amid Middle East tensions and that firms are passing costs through to prices. The squeeze between inflation and growth continues.

After three hikes, signs of a slowdown are spreading across the Australian economy. The statement noted that "growth in consumer spending is easing gradually" and that "momentum in the housing market has shifted, with house prices falling in some cities and new housing loans declining noticeably." The labour market, too, has eased somewhat more than expected in recent months. The Aussie dollar has appreciated following the three hikes.

The RBA warned that "prolonged Middle East tensions could drag on global and Australian growth," while also noting that growth in major trading partners has been stronger than expected, buoyed by AI-related investment. Corporate capital spending and credit growth remain firm. Curbing inflation without over-cooling the economy — this balancing act lies behind the back-to-back holds.

Monetary policy is decided by the Monetary Policy Board, newly established in 2025. Nine members debate, and in recent years the vote breakdown is also published. Tracing the 2026 meetings so far reveals the committee's "hesitation" and "convergence."

The March meeting split right down the middle at 5 vs 4 — the moment the committee was most divided over whether to rush hikes or take a cautious stance. It then converged on a hike 8 vs 1 in May, and held unanimously in both June and August. The vote dynamics directly mirror the policy process of moving "from hesitation to consensus." The decision comes at 2:30 pm Sydney time, with Governor Bullock holding a press conference an hour later.

There are eight meetings a year, roughly every six weeks. At the February, May, August, and November meetings, the detailed quarterly Statement on Monetary Policy (SMP) is published. With today's meeting over, the next is September 28–29.

The market's focus is whether 4.35% becomes a "ceiling" or merely a waypoint. If underlying inflation falls back into the target range (2–3%), the hold continues; if it reaccelerates on higher oil prices or the like, a further hike follows. With the outlook set out in the August SMP (Statement on Monetary Policy) in mind, attention turns to the next move.

The Australian dollar is a leading commodity currency, swayed by the RBA's rate and by China and commodity markets. Hikes usually favor a stronger Aussie dollar, but recently calmer oil prices and slowdown fears have weighed on it, creating a "hawkish but hard for the Aussie to rise" situation. Against the yen, Australia's high rates have underpinned Aussie-buying and yen-selling.