KEY POINTS
- The RBA has held the cash rate at 4.35% after three hikes in 2026 but kept the door open to more.
- Markets are pricing in at least one more hike, to 4.60%, before year-end, with the next decision due in August.
- The case for a hike: core inflation is still above 3% and rising, with sticky housing and services prices.
- The case for a hold: growth is slowing, unemployment is creeping up, and fading fuel pressure may cool inflation on its own.
Will the RBA hike again? After three rate rises in 2026, that is now one of the most contested questions in Australian markets. May’s inflation data only deepened the debate: the headline rate cooled, but the core measure the RBA watches most actually rose. With the cash rate at 4.35%, the question has shifted from when rate cuts begin to whether one more hike is coming. Hike, hold, or cut from here?
Where the Cash Rate Stands and What Markets Are Pricing
The RBA cash rate sits at 4.35%, reached through three straight hikes in February, March and May 2026 that reversed 2025’s cuts. The board held steady in June, but its statement was far from soft, explicitly warning it could lift rates again if needed.
Here is the key shift. A year ago, the debate was about when rate cuts would start. Now it is a question of whether one more hike is coming. Markets are pricing in at least one further increase, to 4.60%, before year-end, with the next RBA meeting in August shaping up as the next live decision.
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The Case for Another RBA Hike
The hawks have a simple argument: inflation is not beaten. The trimmed mean, the RBA’s preferred core measure, rose to 3.6% in May, still above the 2% to 3% target and heading the wrong way. Housing and services prices remain sticky, and the labour market, while softening, is still fairly tight.
The RBA’s own forecasts saw core inflation peaking around 3.8% this quarter, and the board fears high prices becoming “baked in” if it waits too long. We think this is a credible case. If the June quarter inflation comes in hot, an August hike becomes very real, a view some major banks already hold.
The Case for a Hold (or Pause)
The other side is just as real. The full effect of three hikes is still feeding through the economy, and there are signs it is biting. Growth slowed to just 0.3% in the March quarter, unemployment ticked up to 4.5% in April, and consumer spending has cooled.
On top of that, the shock that restarted the hikes is fading. Fuel prices have dropped sharply as Middle East tensions ease, which has already begun pulling headline inflation lower. We lean slightly towards a hold at the next meeting, but with the risk clearly tilted towards one more hike rather than a cut.
What It Means for Investors
So what does this mean for your money? The longer rates stay high, the more pressure builds on property trusts (REITs) and rate-sensitive consumer stocks, where higher borrowing costs squeeze returns. For the banks, the picture is mixed: higher rates can lift lending margins but raise the risk of bad debts if borrowers struggle. The Australian dollar tends to firm whenever hike bets rise.
The smart move is to watch the triggers, not guess the outcome. Three things will decide the RBA’s next step: services and housing inflation, Thursday’s jobs figures, and the tone of the August meeting.
