RBA Holds at 4.35% But Another Hike Is Still on the Table

The Reserve Bank has paused its rate-rise cycle but Governor Bullock says a further increase is 'quite possible' if inflation stays sticky.

The Reserve Bank of Australia left the cash rate unchanged at 4.35 per cent at its August 2026 board meeting — but the rate-rise cycle is not over. Governor Michele Bullock made it clear at her post-meeting press conference that the board only ever considered two options on Tuesday. "Before anyone asks, no, the board did not discuss an interest rate cut at this meeting. It only discussed a raise and a stay," she said.

For borrowers who have already absorbed three rate hikes this year — delivered in February, March and May — that won't provide much comfort. A pause is not the same as the all-clear, and the RBA's updated language suggests the door to further tightening remains firmly ajar.

What the RBA Actually Said

The board's official statement made its position clear. While it acknowledged that financial conditions have tightened in response to the earlier rate rises and that consumer spending growth is slowing, it was equally blunt about inflation.

"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 board stated. Trimmed mean inflation — the measure that strips out volatile price movements and provides the clearest read on underlying price pressure — remains elevated and is little changed from the March quarter.

The RBA does not expect inflation to return to around the midpoint of its 2–3 per cent target range until late 2027. That is a long runway of elevated prices, and it leaves meaningful scope for further policy action. The full statement is available on the RBA's website.

Bullock Flags Another Hike as 'Quite Possible'

Governor Bullock was more direct than the official statement. She said she personally believed another rate increase was "quite possible", and that the board judged the risks to inflation as skewed to the upside.

"I think personally, it's quite possible we might need to go, we think the risks are skewed to the upside. We've decided to wait for more information, but it's still front of mind," she said.

Her remarks make clear that the current hold was a deliberate tactical pause — a chance to assess whether the cumulative effect of three prior increases is flowing through the economy as expected — not a signal that inflation has been tamed.

The key risk Bullock repeatedly flagged was the ongoing Middle East conflict and its effect on oil and energy prices. "The arguments in favour of a hike really are the fact that inflation is still too elevated and we have got upside risks potentially if this conflict continues to go on in the Middle East," she said. "The longer it goes on, the more likely businesses are to embed cost increases into their prices."

Financial markets are currently pricing in a 63 per cent probability of another rate rise by December 2026, according to Property Update. The next few months of inflation, spending, housing and employment data will determine whether the board acts.

The Housing Market Is Slowing — But That Won't Save Rates

Higher interest rates are already having a visible effect on the housing market. Prices have fallen in some capital cities, new housing loan volumes are declining noticeably, and mortgage applications have fallen around 20 per cent since the May federal budget — figures cited by Property Update based on Westpac data. The RBA's own forecasts point to meaningful economic slowing: GDP growth is projected to fall to just 1.4 per cent by December, down from 1.9 per cent in June, as the cumulative effect of the three earlier rate rises continues to filter through household budgets.

Labour market conditions have eased a little more than expected, though leading indicators suggest limited further deterioration in the near term.

Governor Bullock was careful not to let housing conditions dictate policy direction. "The main game here for us is excess capacity, tight labour market, particularly in some areas like construction, the Middle East conflict, the AI boom — these are all the things that are front of mind in terms of risks, the inflation outlook," she said.

A weaker housing market could do some of the RBA's work for it by dampening consumer spending and reducing construction activity. But the board has made clear that its primary lens is the inflation mandate, and until inflation is on a credible path back to the 2–3 per cent target range, all options remain on the table.

What Borrowers Should Do Now

If you currently have a variable-rate mortgage, rates could still move higher. The RBA has not ruled out another hike, Bullock has described it as "quite possible", and market pricing reflects meaningful odds of a further move before year-end.

A few practical steps worth taking:

**Review your repayments.** Use our repayment calculator to model where you would sit if the cash rate moved another 25 basis points. Knowing your number takes the surprise out of the scenario.

**Check your borrowing power.** Higher assessment floors are already reducing how much borrowers can access. If you are planning a purchase or refinance, our borrowing power calculator can help you understand your current position under today's lending conditions.

**Consider refinancing.** Non-major lenders and competitive products have continued to offer attractive terms even as the cash rate has held at 4.35 per cent. If your home loan is more than a year old, a better deal may exist. Our home loan refinance guide is a practical starting point.

**If you are a first-home buyer**, softer demand and falling prices in some capital cities may be improving affordability even as borrowing costs remain elevated. Explore your options at our first home buyer hub.

The path to lower rates is a 2027 story at the earliest — and the board did not even discuss a cut at its August meeting. For a broader look at competitive home loan options in the current environment, see our cheapest home loans comparison.