The Reserve Bank of Australia held its cash rate at 4.35% at its August 2026 meeting, after implementing three rate hikes earlier in the year. Underlying inflation remains stubbornly near 3.6%, while the RBA’s target band sits at 2-3%, with official projections showing a return to target only by early 2028. The RBA is not pivoting toward rate cuts in the near term and may need to raise rates further to tame inflation pressures, concentrated primarily in services and non-tradables sectors. Unemployment is expected to rise to around 4.6%, and Assistant Governor Sarah Hunter indicated that higher inflation outlooks imply rates should be raised to maintain targets. This hawkish stance contrasts with many global central banks that have already begun easing cycles, and comes as Australia’s housing sector shows signs of stress, with household debt-to-income ratios among the highest globally.
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