RBA Review: Last Hike for Now?

The RBA underwent a decisive shift in the first half of 2026 as they raised the official cash rate three times, bringing it to 4.35%. While the hawkish pivot origin from strong domestic demand, external energy shock from the Middle East has exacerbated their stance. Headline Q1 CPI shoot past 4% y/y with latest monthly CPI surged to 4.6%. The strong inflationary pressure from both the geopolitical shock and domestic demand seems to have driven the RBA to hike the third time his year.

Such is nothing new as market participants are well aware of the geopolitical risk and RBA's forecast of bring rates to around 4.35% in 2026. The forward guidance "Having raised the cash rate three times, monetary policy is well placed to respond to developments" seems to be providing new clues and suggest the RBA is done for now. They will definitely have their eyes on the inflation picture. Yet, if there is no more hawkish surprise, they are likely indicating three consecutive hike should be enough to curb inflation without severely affecting economic growth.