)
The Reserve Bank of Australia has held the cash rate target unchanged at 4.35 per cent at its June meeting, pausing after three increases since the beginning of 2026 as it waits to assess the cumulative impact of tightening on an economy where inflation remains "still too high".
The unanimous decision today marks a shift in board cohesion after the previous meeting on 5 May, when the 25-basis-point increase to 4.35 per cent was carried by a majority vote of 8–1.
The hold comes as the board flagged signs the economy is slowing in line with expectations following prior hikes, while also pointing to lingering uncertainty from the Middle East-related oil supply disruption that has pushed fuel costs sharply higher.
In its post-meeting statement, the board says it wants time to assess the response to previous rate increases, adding that it will not hesitate to raise rates further "if required" to return inflation to the 2–3 per cent target band.
Australian Bureau of Statistics data for the 12 months to April 2026 showed annual CPI inflation at 4.2 per cent, easing from 4.6 per cent in March.
However, the RBA's preferred underlying measure - trimmed mean inflation - edged higher to 3.4 per cent from 3.3 per cent, remaining well above the top of the target range.
The largest contributors to annual price growth were transport, up 6.6 per cent, housing at 6.3 per cent, and food and non-alcoholic beverages at 2.8 per cent.
Automotive fuel surged 18.6 per cent over the year, driven by supply disruptions linked to instability in the Middle East.
Stephen Smith, partner at Deloitte Access Economics, says the hold had been widely expected by markets and that the central bank's next move is "more likely to be up than down".
"The Reserve Bank is caught between two uncomfortable facts: inflation remains too high, while economic growth is clearly losing momentum," says Smith.
"That makes its dual mandate difficult to manage. Price stability requires policy to remain tight enough to bring inflation sustainably back to target. But full employment requires the Reserve Bank to avoid putting unnecessary pressure on an economy that is already slowing."
Smith says that adding to the degree of difficulty is the "unusually opaque outlook".
"The proposed US-Iran deal and reopening of the Strait of Hormuz could ease global energy prices if it holds," he says.
"However, until the deal is signed, implemented and reflected in fuel markets it will remain a source of uncertainty, not reassurance.
"At the same time, the likely reinstatement of the full fuel excise from 1 July risks adding another layer of noise to the inflation data.
"A subsequent uptick in inflation would therefore at least partially be a policy-driven increase rather than a sign of stronger domestic demand, but it would still matter for headline inflation, household budgets and inflation expectations."
Smith says this leaves the Reserve Bank with little choice but to wait for clearer evidence.
"A hold today gives it more time to assess how earlier rate increases are flowing through households, businesses and the labour market, while keeping its options open for future meetings," he says.
Today's RBA statement struck a notably cautious tone, with the board emphasising that while headline inflation had moderated, underlying price pressures remained persistent.
The board says it is closely monitoring wages growth, services inflation and the pass-through of higher energy costs to household and business expenses.
The decision to hold follows a rapid tightening sequence that saw the cash rate lifted from 3.85 per cent at the start of 2026 through three consecutive 25-basis-point increases.
The board's shift from a split vote in May to a unanimous hold in June suggests broad agreement that the current level of restriction warrants a period of observation before any further action.
)
