RBA left cash rate at 4.35% and maintained a tightening bias. New forecasts lowered near-term inflation while raising the 2027 outlook. The Australian dollar lacked a clear directional signal.
The Reserve Bank of Australia left the cash rate at 4.35% on Tuesday. The decision was unanimous. The Board described policy as only “somewhat restrictive” and said it could still raise rates “if upside risks materialise.”
New forecasts make the tension visible. The RBA cut its June 2026 headline CPI forecast from 4.8% to 3.9%. The December projection was trimmed from 4.0% to 3.6%. The trimmed-mean forecast was lowered from 3.8% to 3.6% for June and from 3.5% to 3.3% for December. The Board did not carry that improvement forward aggressively. June 2027 headline inflation was revised up from 2.4% to 2.8%. December was raised from 2.4% to 2.6%. The trimmed mean was only marginally lowered from 3.1% to 3.0% for June 2027. It stayed at 2.6% for December. The RBA sees the current inflation picture as better than feared. It still does not trust disinflation enough to bring the target return materially forward.
The statement warned that higher oil costs are feeding through to other prices. Inflation is not expected to return to around the midpoint of the target band until late 2027. The RBA retained a tightening bias even as evidence mounted that earlier rate increases are biting. Consumer spending is slowing. Housing prices have fallen in some capitals. New housing lending has weakened. Labour conditions have eased more than expected. The RBA lifted its unemployment forecast from 4.2% to 4.4% for June 2026 and from 4.3% to 4.5% for December. Later GDP forecasts were nudged higher.
The technical cash‑rate assumption completes the picture. The RBA’s projections are built around a market path that rises toward 4.5%. The forecast convergence of inflation toward target is not based on 4.35% being held forever. The RBA is saying the current rate is restrictive enough to pause and watch. It is not restrictive enough to declare victory.
For markets, the tightening bias survived Tuesday’s meeting. The Australian dollar did not get a fresh hike signal. It also did not get confirmation that peak rates are firmly in place. The RBA gave both sides something to hold onto. Neither side got enough to break a range. The decision follows the pattern described in last week’s analysis of the RBA hold.
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