RBA Holds Cash Rate at 4.35% After Three Hikes but Keeps Door Open

The Reserve Bank of Australia held its cash rate target at 4.35% on June 16, 2026. It was the first time the central bank had left rates unchanged this year, after increases in February, March and May. The decision of the Monetary Policy Board was unanimous and widely expected, but the wording that came with it was firm. This article explains the decision using commentary from the Australian Institute of Company Directors, the National Australia Bank and a property news site, covers the economic data behind it, and notes what has happened since. It is a summary of public information and is not financial advice.

The decision

According to NAB and the Australian Institute of Company Directors, the board voted unanimously to leave the cash rate unchanged. Governor Michele Bullock said the board had not considered a rate rise at this meeting. The statement said the board judged it appropriate to leave the cash rate unchanged while it assesses the effects of past rate rises and the disruption to oil supply. It said financial conditions are tighter than they were and that there are signs the economy is slowing as expected. It also said the board will do what it considers necessary to meet its mandate, including increasing the cash rate target further if required.

Bullock added that the decision does not rule out further tightening in monetary policy, and a property news report quoted her as saying that if rates need to rise again, the board will do so. That wording is why commentators called the decision a hawkish hold: the rate stayed put, but the message leaned toward higher rates, not lower ones.

The inflation picture

Annual headline inflation was 4.2% in the year to April, down from 4.6% in March. Economists had expected 4.4%, so the result was softer than forecast. Underlying inflation, which strips out volatile items such as fuel and some food, was 3.4%. Both figures are above the RBA's target band of 2 to 3%. The board said headline and underlying inflation are still too high, and its focus was on preventing second-round effects, which occur when higher fuel and commodity costs spill into wages and the prices of other goods and services. Some measures of inflation expectations had eased.

AICD's economic commentary noted that inflation had averaged about 3.7% since the March quarter of 2020, which gives context for the board's concern about how long prices have run above target.

The labour market and growth

Unemployment rose unexpectedly to 4.5% in April, against expectations of 4.3%, and employment fell by 18,600 against a forecast rise of 15,000. Other measures of the labour market stayed resilient, and Bullock said it remained a bit tight at that level. A different report listed the rate as 4.3%, so readers should treat figures from secondary summaries with care. This article uses the 4.5% reported by NAB and AICD, which agree.

Growth in the March quarter was 2.5% over the year, above the RBA's estimate of potential growth of about 2%, but quarterly growth slowed from 0.9% to 0.3%, and GDP per person fell 0.1%. NAB's capacity utilisation measure fell below 82% for the first time in a year, and consumer sentiment in June was among the lowest in the history of the survey, according to AICD. Housing values flattened in May, with Sydney down 0.9% and Melbourne down 0.8%.

What forecasters said

Economists were divided on what would come next. Westpac expected further increases, while ANZ expected the rate to stay at 4.35% for the rest of 2026, and NAB expected a hold followed by a cut in the first half of 2027. A survey by Finder of 38 economists found that more than half expected at least one more rise before the end of 2026. The AICD article reported that the May Statement on Monetary Policy had assumed the cash rate would rise from 4.2% to 4.7% by the December quarter of 2026, a path that was above where rates were at the time.

The decision came in the same week that the United States and Iran signed an interim deal, which helped lower oil prices, according to AICD. The board said it was assessing the oil supply disruption, so changes in energy prices were a central variable.

What has happened since

The June pause did not mark the peak. A NAB page notes that a later 25 basis point rise lifted the cash rate to 4.85%, and an earlier report on this site recorded the RBA's November decision as a rise to 4.85% by a 6-3 vote, the fifth increase of the year. The hawkish tone of the June statement was therefore a fair signal, and forecasters who expected cuts in 2027 or a hold through 2026 were proved wrong on the timing.

What it means for borrowers and savers

Most Australian home loans are on variable rates, so changes in the cash rate flow through to repayments within weeks of lenders passing them on. At the time of the June decision, a report from Finder said that 40% of homeowners were struggling with mortgage payments in May, up from 35% in January. Borrowers can check whether their lender has passed on every rise, compare rates with other lenders, and talk to their lender early if repayments are hard to meet. Savers benefit from higher deposit rates, although banks set their own rates and may not match the cash rate move.

What to watch next

Watch quarterly inflation data, the labour market figures, the RBA's statements and minutes, and energy prices. The RBA publishes its decisions and statements on its website. This article summarises public reporting and is not financial advice.