For the third consecutive meeting, the Reserve Bank of Australia (RBA) increased the cash rate by 25 basis points to 4.35% at its May meeting. Read the full statement here.
Inflation remains stubbornly above target. Annual trimmed mean inflation – the RBA’s preferred measure – held at 3.3% in the 12 months to March 2026, according to the Australian Bureau of Statistics, still well clear of the 2–3% target band despite two rate rises. However, headline inflation painted a more concerning picture, surging to 4.6% over the same period, driven largely by soaring transport costs as the Middle East conflict pushes up global oil prices.
The minutes from the Board’s March meeting showed it was already leaning toward further tightening. The minutes noted that members agreed it was important to demonstrate “a clear commitment to returning inflation to target”, warning that if medium- and long-term inflation expectations increased, “it would ultimately require significantly more contractionary monetary policy to achieve the Board’s objectives.” The ongoing conflict in the Middle East has since added to that concern, with higher global energy prices putting further upward pressure on domestic inflation.
With inflation still running above the 2–3% target band, the Board judged that further tightening was needed to return inflation to target in a reasonable timeframe.
