Board did not discuss rate hike at June meeting: Michele Bullock
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More news: Reserve Bank governor Michele Bullock has revealed the monetary policy board did not discuss a rate rise at the June meeting.
When asked at the post-decision press conference on Tuesday afternoon, Bullock said “no, we didn’t” when asked. The board kept rates on hold at 4.35%.
Pressed on the path ahead and the market pricing, she acknowledged there is a variety of views among economists at the moment. She attributed this to a “difference in opinion and judgment” on the weight put on the softness in the economy compared to inflation.
“I think the board feels now, and I think I said this last time, that we’re in a better position than we were at the beginning of the year, when interest rates were three quarters of a percentage point lower,” she said.
“So, we still think that there are risks to the upside, because two reasons: one, we already had an inflation problem before the conflict started, and two, we’ve had an increase in fuel prices and other prices, other commodities, and so on, which is we are seeing it feed in in second round effects.
“So, they’re the two reasons I think we still need to be concerned and watching inflation.”
Bullock also told the media, and the public, not to be “surprised if growth is slow”, adding “you’ve got to expect a slowing in the economy and when we see it, people shouldn’t be alarmed about that, that’s what actually has to happen in order to bring inflation down”.
When asked about the impact of the Fair Work Commission’s increase in the minimum wage, she said she wouldn’t describe this as “material” and said it may well be offset by an expected rise in unemployment.
RBA ‘hawkish’ but potential ‘dovish pivot’ incoming: Economists split on next rate move
Reporter’s view: Associate editor Jennifer Duke writes: Economists have been reacting to the Reserve Bank’s decision to remain on hold at 4.35% with a mixed view of the path ahead.
Some think more rate rises are incoming, while others expect a “dovish tilt” in the near future could be on the cards with rate cuts down the track. This makes it even more critical for RBA governor Michele Bullock to nail the messaging when she speaks at 3.30pm AEST.
The quick reactions so far include a comment from RSM Australia economist Devika Shivadekar who said in a statement that the RBA “seems to be taking stock” of the impacts on businesses and households of its three earlier rate rises.
“The key message is that inflation is still too high for the Bank to relax, even if growth is beginning to soften,” Shivadekar said.
“In that sense, this is not a dovish hold, rather a cautious one. With policy considerably restrictive, more evidence is needed that price pressures are indeed easing before the RBA can feel confident that inflation is heading back to target.”
KPMG chief economist Brendan Rynne is holding firm on expectations for another rate rise, most likely in August.
“With the Middle East conflict seemingly winding down and the real prospect of oil prices falling as a result, the RBA will no doubt be feeling slightly more at ease in some respects,” Rynne said.
“But higher diesel and fertiliser costs from the war are now flowing through and worsening food and transport prices, which will not help in the inflation fight.”
Vanguard senior economist Grant Feng also described the broader policy signal as remaining hawkish but he thinks the central bank will stay on hold for some time.
“The RBA has already tightened financial conditions materially in a short period, and the full effects of that tightening are yet to be felt,” Feng said.
“Early evidence suggests, however, that higher rates are already weighing on domestic demand. The oil-price shock and recent significant tax changes are also contributing to weaker real household purchasing power and softer spending momentum,” he said.
“Against this backdrop, the combination of still-elevated inflation and weakening activity argues for patience rather than another immediate policy shift. We continue to expect the RBA to remain on hold throughout this year. Any further move will be extended into 2027.”
Meanwhile, State Street Investment Management APAC economist Krishna Bhimavarapu said the pause is “well-timed”.
“With the Iran conflict easing, growth momentum softening, and leading inflation indicators rolling over, the backdrop supports an extended hold even as the Bank stays vigilant on second-round risks,” Bhimavarapu said.
“If these trends persist, the RBA may be able to contain broader inflation pressures, opening the door to a more calibrated dovish pivot later this year.”
My colleague Finn McHugh was listening in to Treasurer Jim Chalmers’ press conference this afternoon at 3pm AEST, where he said the decision to remain on hold was “welcome in the context of Australians still under pressure”.
“We expect a lot of Australians to see today’s interest rate hold in that light,” Chalmers said.
But Chalmers warned that despite a 60-day halt to the Middle East war, the impacts of the conflict would take some time to recover from.
“We’re pleased with developments in the Middle East but we’re realistic about how long it will take for the global economy to normalise and what that means for us,” he said.
“The end of this war can’t come soon enough. Australians have already paid a really hefty price for this conflict on the other side of the world.”
Reserve Bank holds interest rates at 4.35%
The news: The Reserve Bank of Australia’s monetary policy board has held the cash rate steady at 4.35%. The decision marks a pause to the central bank’s hiking cycle as it assesses the impact of three consecutive rate rises earlier this year and the stability of an agreement between the US and Iran to reopen the Strait of Hormuz.
The context: The decision was made by a unanimous vote from the nine monetary policy board members.
The monetary policy board said in an accompanying statement that there are indications that higher fuel prices are passing through to “the prices of other goods and services, so inflation is likely to remain high for some time”.
However, the board said “it was appropriate to leave the cash rate target unchanged while it assesses the response to previous interest rate rises and the impact of the oil supply disruption”.
The RBA had already lifted the cash rate by 25 basis points in each of its monetary policy board meetings in January, February and May.
Economists had been widely expecting the RBA to hold the cash rate as they assess the impact of the preceding interest rate hikes and the extent to which the global oil price shock has added additional inflationary pressure across the Australian economy.
Ahead of the latest decision, economists were split on whether the expected interest rate hold would mark the end of the hiking cycle or if further hikes could be on the horizon.
Headline consumer price index data for April came in lower than expected at 4.2%, but this was in part driven by the federal government’s move to halve the fuel excise for three months. Underlying inflation in April actually ticked up to 3.4% from 3.3% in March.
GDP growth also posted its softest quarter since the beginning of 2025 in the three months to March 2026, despite a surge in business investment driven by the data centre boom.
The labour market also showed signs of loosening as unemployment lifted to 4.5% in April, although in trend terms it remained tight at 4.3%.
What they said: “The board remains focused on ensuring that inflation does not become embedded once the impulse from higher oil prices has passed through. To achieve this, growth in demand needs to slow to reduce capacity pressures and help bring inflation back to target,” a statement by the monetary policy board reads.
The board also noted that: “It will do what it considers necessary to achieve that outcome, including increasing the cash rate target further if required.”
The source: RBA monetary policy decision June 2026
