RBA Holds Rates as Inflation Remains Sticky Above Target
The RBA left the cash rate unchanged at 4.35% but signalled potential future moves. Inflation pressures and mixed economic signals leave the path ahead uncertain.
What happened
The RBA's Monetary Policy Board decided to leave the cash rate target unchanged at 4.35% at its latest meeting, after lifting rates three times earlier in 2026. The decision was unanimous, marking a pause in the hiking cycle as policymakers assess how previous rate increases are flowing through the economy. The board noted it would remain attentive to data and evolving economic risks as it guides future decisions.
What it means
Inflation remains the key driver of uncertainty. While headline CPI has fallen to 4.2%, trimmed mean inflation—which the RBA considers a better gauge of underlying price pressures—rose to 3.4%, both measures sitting above the bank's 2–3% target band. The RBA flagged concerns about potential second-round effects from elevated energy prices and warned it remains prepared to hike further if necessary, a stance that surprised some market participants expecting a softer tone.
Bank forecasts remain split on what comes next. Major lenders ANZ and CBA expect the cash rate to remain on hold, while NAB has shifted toward predicting eventual rate cuts. Westpac, however, has not ruled out the possibility of further hikes before year's end. This uncertainty reflects the mixed economic signals—inflation remains sticky despite previous rate rises, the labour market remains resilient, and global developments continue to cloud the outlook.
What to do next
For borrowers, the message is one of cautious persistence. Many households are already managing elevated mortgage repayments following the cumulative 0.75 percentage point increase across the three 2026 hikes, adding roughly $272 per month to repayments on a $600,000 loan. Those with flexibility may consider reviewing their loan structure and serviceability buffer, while others might explore whether refinancing opportunities have emerged as some lenders begin trimming rates in anticipation of future moves.
Key points
- RBA held cash rate at 4.35% following three consecutive hikes in early 2026
- Inflation remains above the RBA's 2–3% target range, with trimmed mean at 3.4%
- Market participants remain divided on whether the next move is a hold, hike, or eventual cut
- Borrowers face ongoing pressure from elevated mortgage repayments and cost-of-living challenges
Sources
General information only. This content is educational and does not constitute personal credit or financial advice.
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