The Reserve Bank of Australia maintained its benchmark interest rate at 4.35% for a second consecutive meeting, keeping policy unchanged after seven increases since February that totaled 75 basis points. Deputy Governor Andrew Hauser emphasized that additional tightening remains on the table if inflation pressures intensify, stating that the central bank would act decisively to curb price growth.
Hauser highlighted three key upside risks to inflation: geopolitical tensions in the Middle East, which have pushed oil prices to three-week highs, the global surge in artificial intelligence-related investment, and persistently weak productivity growth. While he acknowledged that Australia's economic slowdown is gradual rather than a sharp contraction, he cautioned that consumption and employment growth remain subdued compared with historical trends.
Market pricing reflects a roughly 60% probability of another rate increase by December, with futures indicating a potential policy rate of 4.60%. The RBA's latest decision follows a pause in July, aligning with broader expectations that policymakers are assessing the lagged effects of prior tightening on economic activity. Analysts note that the central bank's stance balances inflation containment against the risk of over-tightening amid uneven domestic demand.
The RBA's next policy meeting is scheduled for early September, with investors closely monitoring incoming data on inflation, labor markets, and global commodity trends for signals of further policy adjustments.
