The Reserve Bank of Australia held its cash rate at 4.35 percent, and the forecast published in the same hour assumes the rate goes up to 4.5 percent before it comes down
The cash rate did not move.
At its meeting on Tuesday the Reserve Bank of Australia's Monetary Policy Board left the cash rate target at 4.35 percent, and recorded at the foot of its statement that the decision was unanimous. That follows three increases since the beginning of the year. The Board said monetary policy is judged to be somewhat restrictive, that financial conditions have tightened, and that it decided to hold while it assesses how the economy is evolving.
Then it published the arithmetic underneath that judgement, and the arithmetic does not assume the rate stays where it is.
The forecast is conditioned on a rise
The Statement on Monetary Policy released the same morning carries a Detailed Forecast Table, and one row of it is an assumption rather than a projection. The cash rate is put at 4.3 percent for the four quarters to June 2026, 4.4 percent to December 2026, then 4.5 percent to June 2027 and 4.5 percent again to December 2027, easing back to 4.4 percent across 2028.
That row is not a signal. The table's own footnote says the cash rate is assumed to move in line with expectations derived from financial market pricing, so what it records is what the market thinks, imported into the model as an input. But every other number in the table is built on top of it, which means the return to target that the Bank is forecasting is a return that happens with roughly one more increase in it.
The inflation rows:
| Four quarters to | CPI | Trimmed mean |
|---|---|---|
| June 2026 | 3.9 | 3.6 |
| December 2026 | 3.6 | 3.3 |
| June 2027 | 2.8 | 3.0 |
| December 2027 | 2.6 | 2.6 |
| June 2028 | 2.4 | 2.4 |
Two documents, two dates, one series
The decision statement says inflation is not expected to return to around the midpoint of the target range until late 2027. The Statement on Monetary Policy says the midpoint of the 2 to 3 percent range is reached by early 2028. Neither is a correction of the other. The trimmed mean row reads 2.6 in December 2027 and 2.4 in June 2028, the midpoint is 2.5, and the series crosses somewhere in between, so the shorter document rounds the crossing towards the near end and the longer one towards the far end.
The Board attached a condition to the hold and wrote it out rather than implying it. It will continue to do what it considers necessary, the statement says, "including increasing the cash rate target further if upside risks materialise". Where those risks sit is named: global oil supply will take time to recover, and there are indications that higher fuel prices are being passed through to the prices of other goods and services.
What has already slowed
The labour market has eased by a little more than expected, with the unemployment rate up to 4.4 percent, and the table has it climbing every half year to 4.8 percent by the middle of 2028. Housing has turned. Prices nationally are down 1.6 percent from their peak in March, auction clearance rates have fallen, and new housing loans are declining noticeably. The Overview chapter puts that down to three things at once: the cash rate increases, tax changes announced in the federal budget, and weaker sentiment.
Growth is forecast at 1.4 percent through 2026 and does not reach 1.8 percent until the end of 2028. Labour productivity is negative on the first two dates in the table.
The oil assumption is the quiet one. Brent is carried at 94.9 dollars a barrel for the four quarters to June 2026 and falls in every subsequent column, reaching 71.3 dollars by the end of 2028. The forecasts were finalised on 5 August, six days before the Board met.
