The Reserve Bank of Australia’s monetary policy board debated a 25-basis-point rate hike at its August meeting before voting unanimously to leave the cash rate unchanged at 4.35%, minutes released on Tuesday showed.
Policymakers cited rising inflation risks as a key factor in the deliberation, despite headline inflation easing to 3.9% in the June quarter—below the RBA’s earlier forecast of 4.8%. The decline was driven primarily by lower fuel and travel costs, though inflation remains well above the central bank’s 2% to 3% target range.
Trimmed mean inflation, a key measure of underlying price pressures, is expected to stay above 3% until mid-2027 before gradually easing toward 2.5%. The unemployment rate is projected to rise to 4.8% by the end of 2028, reflecting a gradual softening in labor market conditions.
Market pricing ahead of the September 28–29 policy meeting indicates a 13% probability of a 25-basis-point increase to 4.60%, according to rate futures. By February, the implied chance of a hike rises to about 67%, suggesting growing expectations of tighter policy in the near term.
Housing market activity showed signs of cooling, with national home prices down roughly 1.5% from their March peak. Economic growth is forecast to slow through 2026 before stabilizing in 2027. Inflationary pressures were attributed to potential further increases in oil prices amid Middle East tensions, continued business cost pass-throughs, robust AI and data-centre investment, resilient household demand, and weaker productivity growth.
