RBA signals rate hikes having ‘expected effect’, door open for fourth hike

The RBA says three rates hikes “appeared to be having broadly the expected effect” domestically as international economic pressures ease.

Monetary policy board meeting minutes released on Tuesday from the RBA board’s June 16 meeting show the central bank took heed of falling oil prices and rising equity prices.

The minutes show the three rate hikes so far this year are having their expected effect.

“It would take some time to assess the ultimate impact on the economy of the tightening in monetary policy since February but, at this stage, it appeared to be having broadly the expected effect,” the meeting minutes say.

“Housing demand had eased, which also reflected the broader economic environment and recently proposed tax changes.”

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The RBA board unanimously held rates two weeks ago, saying the three hikes had given it “space” to assess the impacts of oil supply disruptions, but that the board “will do what it considers necessary to achieve that outcome, including increasing the cash rate target if necessary”.

A potential resolution to the US-Iran conflict gave some indication energy markets would settle, the board members noted, and this year’s cash rate rises were working.

“Members agreed that financial conditions were now probably somewhat restrictive,” the minutes say.

“The tightening in monetary policy was starting to be transmitted to the economy through various channels. Conditions in the established housing market had softened and housing credit growth looked set to slow in the period ahead.

“Members noted that information received since the previous meeting had supported the view that the economy was operating with excess demand and widespread inflationary pressures.”

Economic restrictions were clear in economy-wide productivity growth figures, the board members noted.

A jump in the price of new homes was in line with central bank staff forecasts.

“New dwellings price inflation was considerably higher as firms passed on some of the cost impost of higher oil prices.

“By contrast, headline inflation had been weaker than expected by market economists, reflecting weakness in international travel prices and a larger-than-expected decline in fuel prices.”

Commonwealth Bank senior economist Belinda Allen said “there is minimal indication a rate hike is imminent”.

Australia’s biggest bank expects the cash rate to remain at 4.35 per cent for the rest of 2026, with “a lingering possibility of further tightening later this year if inflation is more persistent than expected and the economy is more resilient than forecast”.

“There were no new developments in either the data or the board’s language to suggest a departure from its current wait‑and‑watch approach,” Ms Allen said.

“Part of the board’s willingness to wait reflects the front‑loading of tightening this cycle given the three back-to-back rate hikes.

“Beyond 2026 we see two rate cuts in 2027 based on our economic forecasts.”