RBA Leaves Door Open for Further Rate Hikes Amid Inflation Concerns

The Reserve Bank of Australia (RBA) has held interest rates steady at 4.35% for the second consecutive meeting, but governor Michele Bullock left the door open to further hikes.

Bullock emphasized that the central bank is not ruling out more rate increases if inflation remains above target, which it expects will be the case until early 2028.

The decision was seen as a 'hawkish pause' by economists, rather than a signal that the tightening cycle has ended. Bullock warned of the risks of inflation overshooting forecasts, citing factors such as the Middle East oil disruption and global AI investment boom.

The RBA's staff noted that while housing prices have fallen 1.6% nationally since their March peak, driven by changes to property investor tax breaks in the federal budget, this could weigh on household consumption and take more steam out of the economy.