The Reserve Bank of Australia maintained a tightening bias in June, citing persistent inflation risks, even as markets price in rate cuts by 2027.
The Reserve Bank of Australia held its cash rate at 4.35% in June but indicated it was prepared to raise rates further if inflation risks persisted. The minutes revealed concerns over excess demand and weak housing markets, though the meeting predated a 10% drop in Brent crude prices last week.
Annual consumer price inflation stood at 4.0% in May, with core inflation at 3.6%, both above the RBA’s target. Markets have since priced in just 10 basis points of additional tightening by year-end and 17 basis points of easing through 2027, creating a disconnect with the RBA’s hawkish stance.
The Australian dollar faces pressure as investors weigh the RBA’s willingness to hike against softer global oil prices and domestic growth risks. Falling home prices in Sydney and Melbourne add to concerns about economic momentum.