RBA Hikes to 4.35%, Signals More Rate Increases
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- RBA raised its policy rate to 4.35% in an 8-1 vote, its third consecutive increase, with the lone dissent voting to hold at 4.1%
- RBA blamed Middle East conflict for pushing up fuel and commodity prices, warning of 'second-round effects' on broader goods and services prices
- RBA forecasts pencilled in a 4.7% policy rate by December 2026 — 50 basis points higher than its February projection, and the highest since December 2011 if reached
- RBA sharply upgraded its inflation forecasts to 4.8% for the June quarter and 4% for the year ending 2026, up from prior estimates of 4.2% and 3.6%
- RBA cut its 2026 economic growth forecast to 1.3% from 1.8%, signaling a tightening-driven slowdown
- ANZ Bank called the RBA's tone 'more hawkish than we expected,' noting the board showed no clear opening for a June pause
- Capital Economics projects another hike to 4.60% in Q3 2026, with senior APAC economist Abhijit Surya saying further tightening 'remains likely'
Why it matters: Australian borrowers face renewed mortgage pain as the RBA commits to a tightening path that would push rates to a 15-year high of 4.7% by December 2026. The combination of upgraded inflation forecasts (4.8% for June quarter, up from 4.2%) and downgraded growth (1.3%, down from 1.8%) signals a stagflationary squeeze — a sharper cost-of-living hit for households already paying above 4% on variable loans.
