The Reserve Bank of Australia (RBA) is prioritizing the fight against inflation over other economic concerns. Assistant Governor Sarah Hunter stated that elevated inflation remains the board's primary concern, suggesting that interest rates may need to be pushed even higher to achieve stability.
Following the August 2026 meeting, the RBA maintained the cash rate at 4.35%, after having implemented three rate hikes earlier in the year. As of mid-2026, headline inflation slowed to approximately 4% year-on-year, while underlying inflation remained near 3.6%, exceeding the target band of 2-3%.
The central bank's projections indicate that inflation is not expected to return to the target midpoint until early 2028. Sarah Hunter noted that higher inflation outlooks imply that rates should be raised to maintain these targets.
Inflationary pressure is currently concentrated in the services and non-tradables sectors, as well as external supply shocks, rather than imported goods or energy prices. Simultaneously, unemployment is expected to rise to around 4.6% as the RBA prioritizes long-term price stability over short-term employment gains.
