SYDNEY, August 11, 2026, 15:10 AEST
- The Reserve Bank of Australia kept its cash rate unchanged at 4.35% in a unanimous decision.
- The projection for December trimmed-mean inflation stands at 3.3%, reduced from 3.5% in May.
- The unemployment projection for December increased to 4.5%, up from 4.3%.
- The RBA left the door open to further hikes should inflation risks escalate.
The Reserve Bank of Australia on Tuesday kept its cash rate unchanged at 4.35%. The decision to maintain rates, agreed on by all policymakers, paused a tightening cycle that saw three hikes earlier this year.
The projections clarify the decision to hold steady. Inflation is slowing at a rate exceeding the RBA’s expectations in May, while joblessness is now anticipated to increase at a quicker pace.
The Board faces a tight landing zone. It aims for demand to moderate, while avoiding a shift from gradual labour-market easing to a more pronounced decline.
| 2026 meeting | Decision | Cash rate | Vote |
|---|---|---|---|
| February 3 | Increase by 25 bp | 3.85% | 9-0 |
| March 17 | Increase by 25 bp | 4.10% | 5-4 |
| May 5 | Increase by 25 bp | 4.35% | 8-1 |
| June 16 | No change | 4.35% | 9-0 |
| August 11 | No change | 4.35% | 9-0 |
The Board’s actions in 2026 highlight a rapid shift in approach, moving from two divided hikes to two unanimous holds. Each vote and rate is detailed in the official announcements.
Price pressure continues to act as a constraint. Trimmed-mean inflation reached 3.6% for the June quarter. The RBA anticipates it will remain above 3% until at least mid-2027.
| Year-ended measure | Dec. 2026 new | Dec. 2026 previous | June 2027 new | June 2027 previous | June 2028 new | June 2028 previous |
|---|---|---|---|---|---|---|
| GDP growth | 1.4% | 1.3% | 1.5% | 1.3% | 1.6% | 1.4% |
| Unemployment | 4.5% | 4.3% | 4.6% | 4.4% | 4.8% | 4.7% |
| CPI inflation | 3.6% | 4.0% | 2.8% | 2.4% | 2.4% | 2.5% |
| Trimmed-mean inflation | 3.3% | 3.5% | 3.0% | 3.1% | 2.4% | 2.5% |
The RBA completed these projections as of August 5. Growth is revised upward modestly, but so is the unemployment rate. Headline inflation eases more quickly in the near term, partly reflecting lower-than-expected increases in fuel and travel expenses.
The composition carries greater significance than the main rate itself. By June 2027, the Bank projects underlying inflation at 3.0% and unemployment at 4.6%. This offers limited capacity to absorb a further supply shock.
The RBA noted that housing is shouldering much of the adjustment, with prices dropping in certain capital cities and new housing loans seeing a significant decrease.
Labour conditions have relaxed a bit more than anticipated. Growth in consumer spending is decelerating, but business debt levels and investment activity continue to be robust.
Prior to the decision, Carol Kong, a currency strategist at Commonwealth Bank of Australia ASX:CBA, stated: “The RBA is likely to emphasise inflation remains elevated and that it is prepared to raise the cash rate again if required.” Her projection was consistent with the Board’s statement. Reuters
| Market-positioning assumption | Dec. 2026 | June 2027 | Dec. 2027 | June 2028 | Dec. 2028 |
|---|---|---|---|---|---|
| Projected cash rate | 4.4% | 4.5% | 4.5% | 4.4% | 4.4% |
| AUD trade-weighted index | 65.3 | 65.3 | 65.3 | 65.3 | 65.3 |
The technical path for the cash rate in the forecast is based on market pricing as of August 5 and maintains the rate close to its present level until 2028. The forecast also assumes a stable currency. These are inputs for the model, not commitments from the RBA.
Before the announcement, the Australian dollar advanced to an eight-week peak at $0.7057. The rise was attributed to the RBA’s hawkish approach as well as general softness in the U.S. dollar.
Risks: An extended conflict in the Middle East has the potential to drive up energy costs and dampen activity. Inflation at home may remain elevated if businesses transfer increased costs to consumers. A more rapid decline in housing or employment would have the opposite effect.
The upcoming decision depends on whether the softer inflation trend is maintained in the latest data. An additional hike is still on the table. However, the revised unemployment projections highlight its potential impact.
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