The nation’s central bank met Monday and Tuesday of this week for its latest meeting on monetary policy, holding the official cash rate (OCR) at 4.35%. The bank cited a desire to allow the impact of previous rate increases to flow through the economy while it assesses whether inflationary pressures are easing.

“Following three increases in the cash rate target since the beginning of the year, financial conditions are now tighter than they were, and the economy appears to be slowing as expected,” the RBA said in its decision. “But inflation is still too high. It is not expected to return to around the midpoint of the target range until late 2027 and there are upside risks to this projection. With monetary policy judged to be somewhat restrictive, the board decided to leave the cash rate target unchanged while it assesses how the economy is evolving. The board will continue to do what it considers necessary to bring inflation sustainably back to target, including increasing the cash rate target further if upside risks materialise.”

The decision was unanimous.

The RBA raised interest rates three time in 2026 so far, before hitting the pause button at its June meeting. The decision reflected the bank’s view that there simply hadn’t been enough time for the previous hikes to fully work their way through the economy, a process that can take months to feed into household spending, borrowing costs and overall demand.

At the same time, the nation’s central bank has been under increasing pressure to bring inflation back down to its target rate between 2% and 3%.

The latest consumer price index (CPI) brought some relief as inflationary pressures started to subside and were below the RBA’s forecast. But the numbers were still above the target band.

Headline CPI, in seasonally adjusted terms, rose 3.8% in the 12 months leading up to June, down from 4% in the year leading up to May, and below the RBA’s expectation of 4%. Trimmed mean inflation increased 3.6% in June, the same as in the year leading up to May.

As this unfolded, unemployment remained unchanged in June at 4.4%, the same as May, heightening concerns that the RBA might raise rates at its next meeting.

Mortgage holders and property investors have been under increasing pressure from the tightening cycle, navigating higher borrowing costs at a time when household living expenses remain elevated.

Recent tax changes persistent global uncertainty and Australia’s stubborn housing shortage have only compounded the pressure, adding to economic uncertainty and weighing on sentiment across the property market.

Meanwhile, against the same backdrop, markets – including all four of Australia’s major banks – have been optimistic that the RBA would hold rates for now.