RBA Signals Another Rate Hike If Inflation Risks Crystallise

The Reserve Bank of Australia (RBA) has left interest rates at 4.35% for now, but Deputy Governor Andrew Hauser warned that if inflation risks 'crystallise', the bank will raise rates again.

Hauser's comments are a reminder that the RBA's 'pause' is conditional: officials have held the cash rate steady for two meetings, but they still see a plausible path to more tightening. Recent rate rises are starting to bite, with the economy slowing and inflation printing below expectations, and Reuters noted the housing market has softened more than the RBA anticipated.

Hauser pointed to three potential sources of renewed price pressure: higher energy costs tied to the Middle East conflict, an AI-driven investment boom that could lift demand, and weak productivity that makes it easier for wages and costs to show up as higher prices. Markets have responded by keeping another small hike in play, implying roughly 60% odds of a move to 4.60% by December.

For households with variable mortgages, this means borrowing costs may not get much relief while 4.60% is still on the table. Banks' short-term funding costs can stay high if markets expect another rate hike, limiting how much lenders can cut variable mortgage rates or sharpen new fixed-rate deals during a 'pause'. If a hike does arrive, it usually flows through fastest to variable-rate borrowers.