RBA Hits the Pause Button: Cash Rate Stays at 4.35% After Three Straight Hikes
Australia's central bank has pressed pause on its rate-hiking cycle — but homeowners shouldn't celebrate just yet.
The Reserve Bank of Australia delivered a widely anticipated decision on Tuesday, June 16, keeping the cash rate unchanged at 4.35% in its first pause of the year, as signs emerged that a trio of earlier hikes are beginning to weigh on the economy.
The back-to-back hikes in February, March and May had lifted the cash rate by 75 basis points since the start of the year, reversing two years of holds and cuts, and pushing borrowing costs to their highest point in more than 18 months.
A Unanimous Decision — But Not a Soft One
The board's decision was unanimous, and in the press conference that followed, RBA Governor Michele Bullock revealed that no board member had even considered raising rates this month. However, she made it clear that relief for borrowers may be short-lived.
Bullock said inflation remained too high, noting that while consumer sentiment and business confidence had weakened, household spending and investment had not materially softened.
She also pointed to geopolitical factors as a key risk driver. Conflict in the Middle East had "supercharged" existing inflation, particularly through surging petrol prices, with secondary effects such as rising building costs now feeding through the broader economy.
Despite the pause, Bullock made clear that today's decision should not be read as the end of the inflation fight, saying further tightening remains on the table if price pressures don't ease.
A Unanimous Decision — But Not a Soft One
The board's decision was unanimous, and in the press conference that followed, RBA Governor Michele Bullock revealed that no board member had even considered raising rates this month. However, she made it clear that relief for borrowers may be short-lived.
Bullock said inflation remained too high, noting that while consumer sentiment and business confidence had weakened, household spending and investment had not materially softened.
She also pointed to geopolitical factors as a key risk driver. Conflict in the Middle East had "supercharged" existing inflation, particularly through surging petrol prices, with secondary effects such as rising building costs now feeding through the broader economy.
Despite the pause, Bullock made clear that today's decision should not be read as the end of the inflation fight, saying further tightening remains on the table if price pressures don't ease.
What the Big Banks Are Saying
The four major banks had all predicted a hold going into Tuesday's announcement — but their forecasts diverge sharply from here. The Commonwealth Bank of Australia, NAB and ANZ are all predicting a cut at the next meeting in August, while Westpac is forecasting another hike then — and again in September.
ANZ also flagged the risk of another hike in August if second-quarter inflation data surprises on the upside.
A Moment of Calm, But Not Safety
After three back-to-back rate hikes already in 2026, Tuesday's decision offers temporary relief for mortgage holders. However, data shows that 40% of homeowners were already struggling to meet repayments in May — up from 35% in January.
Economists say the RBA is likely waiting on more data before its next move. PRD chief economist Dr Diaswati Mardiasmo believes the RBA is holding fire until the release of the June quarter CPI figure at the end of July, ahead of its next meeting in August.
Financial markets broadly agreed with economists, but were still pricing in about a one-in-two chance of at least one more rate rise before the end of 2026.
One Key Misconception Addressed
Governor Bullock also used the press conference to push back against a common public misunderstanding. She warned that bringing inflation back under control will not reverse the price increases Australians have already experienced — lower inflation does not automatically mean lower prices.
(Source : Market Analysis )