RBA Keeps Rates on Hold Amid Easing Price Pressures and Middle East Risks

The Reserve Bank of Australia (RBA) has maintained its current monetary policy stance for the second consecutive meeting, keeping the policy rate at 4.35%. The decision was in line with market expectations and reflects the central bank's assessment that the effects of monetary tightening are easing price pressures somewhat sooner than previously forecast.

However, the RBA also warned that inflation risks remain skewed to the upside against the backdrop of escalating Middle East tensions. This cautionary note suggests that the central bank is prepared to act if necessary to bring inflation back within its target range.

The economic outlook presented in the quarterly report saw only minor revisions, with the RBA projecting that consumer price index (CPI) growth will peak at 3.9% in the second quarter and then decline to 2.6% by end-2027. The trimmed mean, the RBA's preferred underlying inflation gauge, is expected to slow from 3.6% in the second quarter to 2.4% by mid-2028.