RBA delivers June rate decision

The Reserve Bank of Australia (RBA) has left the official cash rate unchanged at 4.35 per cent, a move widely expected by economists and market commentators.

This decision follows three consecutive cash rate hikes in February, March and May, which were predominately spurred on by rising inflation and global economic turmoil after the onset of the US/Iran war, which sent oil prices skyrocketing worldwide following the closure of the Strait of Hormuz.

Preceding the announcement, Australia’s major banks shifted their forecasts to reflect that the RBA will likely keep interest rates at its current level of 4.35 per cent, with the possibility of monetary policy easing continuing in the later half of 2027.

This view is held by CBA, ANZ and NAB, with Westpac remaining the single outlier (at the time of writing), forecasting two further rate hikes in August and September, which would bring the cash rate to 4.85 per cent.

Westpac argued that inflation risks remain too prevalent for the RBA to claim victory, pointing to higher energy prices, wage growth and ongoing tensions in the Middle East.

Nevertheless, the latest GDP data for the March quarter released by the Australian Bureau of Statistics (ABS) revealed a rise of 0.3 per cent, supporting the case for a hold in today’s meeting, according to economists.

This was supplemented by a higher unemployment rate, which rose to 4.5 per cent over April 2026, and April’s CPI figures showing slight easing in Australia’s inflation rate, falling from 4.6 per cent in March to 4.2 per cent.

However, this is still well above the RBA’s long-coveted inflation target of 2-3 per cent. Underlying inflation had reversed course over the latter half of 2025 when it initially appeared that the central bank had achieved its goal of lowering inflation into the target range.

Additionally, RBA governor Michele Bullock acknowledged the limits of monetary policy in the face of an externally driven energy shock – namely rising oil prices globally – during the board’s post-meeting press conference in May.

Bullock justified the previous rate hike stating that Australians are “poorer because of this shock to oil prices and energy prices”, and that the board was attempting to prevent a second wave of higher inflation driven by business pricing behaviour and wage dynamics. 

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