The Reserve Bank of Australia says its three interest rate increases this year are having broadly the effect policymakers intended, while leaving the door open to a fourth hike if inflation proves more persistent than expected.
The cash rate currently sits at 4.35 percent. Minutes from the RBA board's latest meeting show members agreed the earlier increases "appeared to be having broadly the expected effect," with housing demand easing as a result of the tightening already delivered. The board also agreed that financial conditions were now "probably somewhat restrictive."
Excess demand still a concern
Despite the cooling in housing, the RBA noted the broader economy was still "operating with excess demand and widespread inflationary pressures." The central bank said it "will do what it considers necessary to achieve that outcome, including increasing the cash rate target if necessary," language economists read as keeping a fourth hike firmly on the table rather than signaling an end to the tightening cycle.
Economists see a pause, not a pivot
Commonwealth Bank is forecasting the cash rate will hold at 4.35 percent for the rest of 2026, though it flagged "a lingering possibility of further tightening later this year if inflation is more persistent than expected." CBA economist Belinda Allen said there is currently "minimal indication a rate hike is imminent," suggesting the central bank is likely to hold steady for now while keeping the option open.
