Reserve Bank of Australia holds cash rate at 4.35 percent while assessing prior tightening and oil-driven inflation

The Reserve Bank of Australia left the cash rate target unchanged at 4.35 per cent, judging that inflation remains too high but that it should pause while assessing the effects of the three rate increases delivered since the start of 2026 and the inflation impact of disrupted global oil supply. The board said higher fuel prices are lifting inflation directly and appear to be feeding into other goods and services, adding to existing capacity pressures and making it likely that inflation will stay elevated for some time. Inflation picked up materially in the second half of 2025, and the latest data show both headline and underlying inflation remain too high. Financial conditions have tightened, with higher money market rates and government bond yields and an appreciated exchange rate. At the same time, consumer spending is showing signs of slowing and housing momentum has softened, although labour market indicators outside the April unemployment rate have been more resilient, business investment remains strong and credit is still readily available. The board also highlighted heightened uncertainty from the Middle East conflict, with risks that inflation could be higher and activity weaker than in its May baseline forecasts. The board said future decisions will be guided by incoming data and its evolving assessment of the outlook and risks, with close attention to global conditions, domestic demand, inflation and the labour market. It said monetary policy can respond as needed and that further increases in the cash rate target remain possible if required. The decision was unanimous.