Economy
Jun 16, 2026
RBA Holds Cash Rate at 4.35% as Growth Slows and Unemployment Rises
The Reserve Bank of Australia kept its official cash rate at 4.35% on 16 June 2026, citing persiste…
The Reserve Bank of Australia (RBA) left its official cash rate unchanged at 4.35% on 16 June 2026, signalling that further tightening remains on the table as inflation stays above target and economic activity slows.Decision Rationale: Inflation Still Too High, Growth Needs to CoolThe board’s statement highlighted two core concerns: price pressures remain elevated and demand‑side growth must decelerate to ease capacity constraints. It warned that higher fuel prices linked to geopolitical tensions could push inflation higher than forecast.Numbers on the Table: GDP, Unemployment, Mortgage PaymentsReal GDP growth slowed to 0.3% in the March quarter, down from 0.9% in the December quarter of 2025.Unemployment rose to 4.5% in May, the highest level since 2021.Average new mortgage of $745,000 at a 6% rate now costs $4,467 per month, up from $4,114 before the latest hike.The Australian dollar slipped from 70.54 US¢ to 70.49 US¢ immediately after the announcement.S&P/ASX200 index moved from 8,890 to 8,914 points.Market and Household Impact: Currency, Shares, BorrowersInvestors interpreted the hold as a signal that rate cuts are unlikely in the near term, prompting modest equity volatility.Home‑owners face higher servicing costs; a fourth hike would add roughly $120 to monthly repayments.Westpac projects fuel prices of 205 cents/litre for petrol and 239 cents/litre for diesel over the next three months.Analyst Stephen Smith (Deloitte Access Economics) noted the RBA has “little choice but to wait” on further data, keeping a hike on the table.What’s Next? Forecasts and Potential Policy PathEconomists at ANZ, Commonwealth Bank and NAB expect the peak has been reached, with cuts possibly starting mid‑2027. Conversely, Westpac’s chief economist Luci Ellis sees a higher‑for‑long inflation scenario, forecasting a rise in the cash rate in August‑September 2026 and no cuts until 2028. The RBA’s next meeting will test whether the slowdown in activity and the resolution of Middle‑East tensions are sufficient to keep policy steady.
#Reserve Bank of Australia
#RBA
#Jim Chalmers
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