What is the main reason why the Reserve Bank of Australia kept interest rates on hold?

The Reserve Bank of Australia maintained the official cash rate at 4.35% because the monetary policy board is concerned about persistent domestic inflation risks.

What are the specific inflation numbers driving the decision by the Reserve Bank of Australia?

The Reserve Bank of Australia noted that headline inflation eased to 4% in May, though underlying price pressures continue to accelerate. The board stated that growth in unit labour costs also remained above its historic average during the inflation-targeting period.

How does weak productivity growth impact the policy outlook for the Reserve Bank of Australia?

The Reserve Bank of Australia stated that weak productivity growth reduces the economy's supply capacity and sustainable growth rate. Consequently, the monetary policy board remains alert to the potential need to lift the cash rate above 4.35% in future meetings.

What global risks are threatening the economic forecast of the Reserve Bank of Australia?

The Reserve Bank of Australia flagged ongoing conflicts in the Middle East as a primary risk that could result in higher inflation and lower economic activity.

What does the interest rate decision mean for the Australian housing market?

The Reserve Bank of Australia noted there is a risk of a material weakening in housing markets following three interest rate hikes earlier this year. The board stated that this housing pressure, combined with government tax changes, could lead to a slowing in consumption growth.

Image for illustrative purposes only. Not a real photo.

RBA concerned by weak productivity growth

Written by Brie CarterPublished Jun 30, 2026, 5:15 AM

The Reserve Bank of Australia maintained the official cash rate at 4.35% amid persistent domestic inflation risks.
The local stock market reacted neutrally to the news, as underlying price pressures remain elevated.
The monetary policy board stated that future interest rate increases remain possible to counter weak economic productivity.

The Reserve Bank of Australia kept the official cash rate at 4.35% last June 16.

Policymakers noted that headline inflation eased to 4% in May, though underlying price pressures continue to accelerate.

Meeting minutes revealed that board members remain concerned about the negative economic impacts of weak productivity growth.

The central bank stated that rising unit labour costs and elevated oil prices could continue to fuel domestic inflation.

Additional risks to economic activity include potential weakness in housing markets and ongoing conflicts in the Middle East.

The newly established monetary policy board intends to monitor these domestic and global risks before adjusting future interest rates.