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The Reserve Bank of Australia’s Monetary Policy Board kept the cash rate target steady at 4.35 percent in a unanimous decision announced following its August 11 meeting. The central bank highlighted that inflation had picked up materially in the second half of 2025 with some of the rise reflecting greater capacity pressures in the economy. Headline inflation is still too high while trimmed mean inflation remains elevated and has shown little change since the March quarter the bank reported.
According to the RBA statement financial conditions have tightened following the three cash rate increases implemented this year leading to higher money market rates government bond yields and an appreciated exchange rate. Consumer spending growth is slowing gradually as anticipated even as business debt and investment growth remains strong. The housing market has seen a shift in momentum with prices falling in some capital cities and new housing loans declining noticeably while labour market conditions have eased slightly more than expected.
The central bank assessment found continued heightened uncertainties surrounding the domestic economic outlook and inflation path. Resolution of the Middle East conflict is still uncertain with scenarios possible where inflation runs higher and economic activity lower than projected. Global oil supply disruptions are expected to take time to resolve sustaining upward pressure on energy prices and potentially feeding into broader domestic inflationary pressures the statement indicated.
RBA figures show that inflation is likely to stay elevated for some time with the impulse from disrupted global oil supply adding to existing capacity pressures. The bank does not expect inflation to return to the midpoint of its target range until late 2027 and identified upside risks to this projection. In response the board judged monetary policy to be somewhat restrictive and opted to hold rates while continuing to evaluate economic developments.
The Monetary Policy Board stated that it will continue to do what it considers necessary to bring inflation sustainably back to target including by increasing the cash rate further should upside risks materialise. It added that the board will remain attentive to incoming data and the evolving assessment of risks to guide future decisions. Monetary policy stands ready to respond to developments as the bank pursues its dual mandate of price stability and full employment the release concluded.
