- Decision
- Lower
- Rate change
- 25 bps
- cash rate target
- 4.1%
The Reserve Bank of Australia cut the cash rate target by 25 bp to 4.10 percent and lowered remuneration on Exchange Settlement balances to 4 percent, citing faster-than-expected disinflation, subdued private demand and easing wage pressures that support confidence in inflation moving towards the 2–3 percent band’s midpoint. Policy remains restrictive, with December-quarter underlying inflation at 3.2 percent and projections nudged higher for 2026 amid still-elevated unit labour costs, tight labour-market indicators and weak productivity growth. The Bank notes weak output and uncertain household consumption prospects even as tightening global labour conditions and geopolitical and policy uncertainties cloud the external outlook; while many foreign central banks have begun easing, markets have recently pared back expectations, particularly for the United States. The Board will base future decisions on incoming data and risk assessments, stressing readiness to adjust as necessary to ensure inflation returns to target.
Rate evolution
From July 2025 to August 2026, the Reserve Bank of Australia’s cash rate target rose by a net 50 basis points to 4.35%, after an August cut and a pause through December gave way to three consecutive hikes from February, before the Board left the rate unchanged on 16 June and 11 August 2026. That early easing and the ensuing hold reflected substantial disinflation, with underlying inflation near the midpoint of the 2–3% range, while private demand recovered only gradually and the Board weighed weak productivity, high unit labour costs, tight labour conditions and elevated global uncertainty. By late 2025, however, the Board said underlying inflation had picked up, private demand and housing were strengthening and financial conditions had eased, shifting its language from more balanced inflation risks to a more cautious assessment of persistence and upside risk.
In subsequent decisions, it judged that stronger-than-expected private demand, greater capacity pressures, a tight labour market and fuel price increases linked to the conflict in the Middle East were likely to keep inflation above target for some time, with higher inflation expectations and possible second-round effects tilting risks to the upside despite heightened uncertainty and the possibility of weaker activity. Holding the cash rate target at 4.35% in June, the Board said headline and underlying inflation were still too high and that the disruption to global oil supply was adding to inflation and passing through to other prices, but it also noted tighter financial conditions, signs consumer spending was slowing as expected, a shift in housing market momentum and a higher-than-expected unemployment rate in April, and judged it appropriate to assess the effects of earlier increases and the oil supply disruption while remaining prepared to raise the cash rate target further if required. In August, the Board again held the rate at 4.35%, judging monetary policy somewhat restrictive and the economy to be slowing as expected, while noting that headline inflation remained too high, trimmed mean inflation was elevated and little changed, and capacity pressures and higher energy costs were likely to keep inflation high for some time, with upside risks warranting a further increase if they materialised.