RBA Holds Cash Rate at 4.35% and Warns Further Hikes Remain Possible

Australia’s central bank left its benchmark cash rate unchanged at 4.35% on Tuesday, but stressed the pause was not a turn toward easier policy, warning it could still raise borrowing costs again if inflation risks worsen.

“At its meeting today, the Board decided to leave the cash rate target unchanged at 4.35 per cent,” the Reserve Bank of Australia said in a media release after its Aug. 11 policy meeting. The bank added that “Today’s policy decision was unanimous” and said “the Board decided to leave the cash rate target unchanged while it assesses how the economy is evolving.” It described monetary policy as “somewhat restrictive.”

The RBA made clear that inflation remains its overriding concern. It said inflation “picked up materially in the second half of 2025” and is still too high, and reiterated that it “will continue to do what it considers necessary to bring inflation sustainably back to target, including increasing the cash rate target further if upside risks materialise.”

The bank said it does not expect inflation to return to around the midpoint of its target range until late 2027, absent further developments. It also pointed to risks from the conflict in the Middle East, saying oil and related commodity prices remain above pre-conflict levels and could keep inflation higher for longer.

In explaining the decision to hold, the Board said financial conditions had tightened following three rate increases earlier this year. It said money-market rates and government bond yields had risen, while the exchange rate had appreciated.

On the domestic economy, the RBA described a mixed picture. Consumer spending growth is slowing, it said, but business debt and investment remain strong. Housing-market momentum has also shifted, with prices falling in some capital cities and new housing loans declining.

The cash rate is Australia’s benchmark interest rate and influences borrowing costs across the economy, including mortgages and business loans. Tuesday’s decision marked the second straight hold after the RBA raised the rate to 3.85% on Feb. 3, 4.10% on March 17 and 4.35% on May 5. It then left the rate unchanged on June 16 and again on Tuesday.

Recent inflation data had eased some expectations of an immediate follow-up increase. Reuters reported that Australian Bureau of Statistics data released July 29 showed consumer prices rose 0.6% in the June quarter, after 1.4% in the first quarter, while trimmed-mean inflation was about 3.6% from a year earlier, a softer reading than some forecasts.