The Reserve Bank of Australia (RBA) left its cash rate unchanged at 4.35% on Tuesday, pausing after three consecutive interest rate increases as policymakers assessed the impact of tighter financial conditions and ongoing inflation pressures.
The decision was widely expected by financial markets and was unanimously supported by the RBA Board.
In its post-meeting statement, the Board noted that inflation remains uncomfortably high and continues to pose a challenge for policymakers.
"Inflation picked up materially in the second half of 2025, and information since the beginning of this year confirms that some of the increase reflected greater capacity pressures. The latest data show that headline and underlying inflation are still too high."
The Board also highlighted heightened economic uncertainties, as developments in the Middle East remain a key risk factor.
"There continue to be heightened uncertainties about the outlook for domestic economic activity and inflation. Resolution of the conflict in the Middle East is at an early stage, and there are plausible scenarios where inflation is higher and activity lower than envisaged under the May baseline forecasts."
"Global oil supply issues will take some time to resolve, maintaining upward pressure on global energy prices and inflation. At the same time, a period of prolonged uncertainty may also cause growth to be lower in Australia’s major trading partners and in Australia."
The RBA indicated that it remains primarily focused on preventing elevated inflation from becoming entrenched in the economy once the immediate effects of higher energy prices fade.
"The Board remains focused on ensuring that inflation does not become embedded once the impulse from higher oil prices has passed through.
"To achieve this, growth in demand needs to slow to reduce capacity pressures and help bring inflation back to target."
"Following the three increases in the cash rate target since the beginning of the year, financial conditions are now tighter than they were, and there are signs that the economy is slowing as expected.
"But inflation is still too high and the Board judged that it was appropriate to leave the cash rate target unchanged while it assesses the response to previous interest rate rises and the impact of the oil supply disruption."
