Reserve Bank of Australia Holds Cash Rate at 4.35%

The Reserve Bank of Australia unanimously decided to keep the cash rate steady at 4.35% on Tuesday, August 11, 2026. This marks the second consecutive meeting without a change, aligning the bank more closely with the U.S. Federal Reserve's recent pause. The board is wagering that higher unemployment and a weakening property market will sufficiently cool inflation, which has remained above the bank's 2-3% target for approximately five years.

Governor Michele Bullock noted that the housing market eased more than anticipated in May, citing a general softening in sentiment and federal budget cuts to property investor tax concessions. The bank expressed concern that this deterioration could further dampen economic growth through the wealth and turnover effects, where falling home prices lead to decreased consumer spending.

Despite the pause, the bank expects inflation to remain above 2.5% until early 2028 and may not return to the target midpoint until late 2027. A quarterly trimmed mean measure of 3.6% undershot previous forecasts, providing the board room to monitor geopolitical tensions in the Strait of Hormuz and deadlocked talks between the United States and Iran. Bullock maintained the possibility of future rate hikes if upside risks materialize, as the board remains focused on ensuring high inflation does not become embedded.