RBA Holds Key Rate Steady

The Reserve Bank of Australia kept its cash rate unchanged at 4.35% in a unanimous decision at its August 2026 meeting, in line with market expectations. Policymakers noted that financial conditions have tightened following three rate increases earlier this year and that the economy appears to be slowing as expected. Still, inflation remains too high, with capacity pressures contributing to the pickup in H2 2025 and higher oil and related commodity prices linked to the Middle East conflict adding pressure. Short-term inflation expectations, though easing, also remain elevated. Meanwhile, consumer spending growth is slowing, housing momentum has weakened and labour market conditions have eased more than expected. The Board expects inflation to remain high and return to around the midpoint of the target range in late 2027, with upside risks. Policymakers held rates while assessing incoming data but may raise the cash rate if inflation risks materialise.

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