The Reserve Bank left the cash rate target unchanged at 4.35 per cent on 11 August. The decision was unanimous and marked a second consecutive hold.
Headline inflation currently sits at 3.8 per cent against a target band of 2 to 3 per cent, with unemployment at 4.1 per cent. The Board has not reached the midpoint of its target for around five years.
The statement noted that inflation picked up materially in the second half of 2025, and that information since the start of this year confirmed some of that increase reflected greater capacity pressures. Trimmed mean inflation remains elevated and little changed from the March quarter.
Oil and most related commodity prices remain above pre-conflict levels. Some firms experiencing cost pressures are raising prices and others are looking to do so, while short-term inflation expectations have eased from earlier in the year without returning to normal.
The Board is relying on higher unemployment and a weakening property market to slow activity enough to cool inflation. Forward guidance shifted to indicate that inflation risks are now tilted to the upside rather than being two-sided.
The Bank also attached a timeline, indicating inflation is unlikely to return to target until late next year. That leaves scope for further tightening if required.
The rate path this year has been active. The Board raised the cash rate three times during 2026, in February, March and May, lifting it from 3.60 per cent to 4.35 per cent before holding at subsequent meetings.
Economists are split on what follows. Finder found 92 per cent of surveyed experts correctly predicted the hold, with 44 per cent expecting at least one more increase during 2026, down from 55 per cent the previous month. A further increase would take the cash rate to levels not seen since 2011, while savings rates are currently paying above 5 per cent.
