The Reserve Bank of Australia left the cash rate unchanged at 4.35%, while signaling that inflation remains too high and is not expected to return to the midpoint of the target range until late 2027, despite signs that tighter policy is slowing the economy.

• The RBA held the cash rate target at 4.35% in a unanimous decision, judging monetary policy to be somewhat restrictive after three rate increases earlier in 2026 while it assesses how the economy evolves.

• Headline inflation remains too high, and trimmed mean inflation is described as elevated and little changed from the March quarter. The Bank expects inflation to remain above target for an extended period, with a return to around the midpoint of the target range only in late 2027.

• The Board said the Middle East conflict has had less impact on inflation than previously expected, but oil and related commodity prices remain above pre-conflict levels, with higher fuel costs increasingly being passed through into broader goods and services prices.

• Financial conditions have tightened following the year's three rate hikes, with higher money market rates, government bond yields, and an appreciating exchange rate, indicating monetary policy is transmitting through financial markets.

• Domestic demand is showing signs of moderation. Consumer spending growth is slowing gradually, housing prices have declined in some capital cities, and new housing loans have fallen noticeably, while business debt and investment remain strong.

• Labor market conditions have eased slightly more than expected in recent months, although the Bank noted that leading indicators point to only limited additional easing in the near term, suggesting the labor market remains relatively resilient.

• The RBA highlighted heightened uncertainty around both growth and inflation, noting that prolonged disruptions to global oil supply or an extended Middle East conflict could produce higher inflation and weaker economic activity than currently forecast.

• The Board reiterated that it remains prepared to raise the cash rate further if upside inflation risks materialize, emphasizing a data-dependent approach focused on returning inflation sustainably to target while supporting full employment.

• Statement on Monetary Policy - August 2026