News
Australia · Inflation · Interest Rates · RBA
The Reserve Bank of Australia (RBA) maintained its cash rate at 4.35% on Tuesday, June 16, 2026, pausing for the first time this year, but explicitly warned that further rate hikes are necessary if inflation remains elevated.
Governor Michele Bullock stated the board did not consider a hike at this meeting, acknowledging the economy is slowing as expected due to tighter financial conditions. However, inflation remains too high, with annual inflation at 4.2% in April and underlying inflation picking up to 3.4%, exceeding the RBA's 2% to 3% target band.
The RBA has already increased rates by 75 basis points since February. The Australian economy grew by a mere 0.3% quarterly in the first quarter, and the unemployment rate reached a 4-1/2-year high of 4.5%.
Markets reacted with the Australian dollar down 0.3% at $0.7050, and swaps imply a 26% chance of an August hike, totaling 13 basis points of tightening for the year. Sally Auld, chief economist at National Australia Bank, asserts that the market must retain some chance of tightening in the coming months, as inflation takes precedence over growth.
Kellie Wood, head of fixed income at Schroders, believes the RBA has done enough for now, viewing August as a "watching, not moving" period, but cautions that a consumption slowdown could overshoot.
