Majors flag rate-rise risk after ‘hawkish’ RBA minutes

Yet the minutes, released on Tuesday (25 August), revealed that the board’s decision to pause came after detailed consideration of whether further hikes were required to tame inflation.

The central bank said recent data had pointed to gradual progress, with inflation easing from its March peak and underlying inflation running slightly below its late-2025 pace.

“Members noted that data received since the previous meeting indicated that the economy was progressing towards the board’s objectives. Inflation had eased from its peak in March and the quarterly rate of underlying inflation was slightly lower than it had been in late 2025,” the minutes said.

“On some metrics, this progress had occurred a touch more rapidly than had been expected. Nonetheless, members observed that inflation was still too high and that the economy continued to operate with excess demand.”

Restrictive rates cool housing demand, says RBA

The minutes also pointed to signs that the earlier increases in the cash rate were gaining traction across interest-sensitive parts of the economy, including housing and credit.

“Members judged that financial conditions were somewhat restrictive, following increases in the cash rate target earlier in the year,” the minutes said.

“They observed that momentum in the housing market had shifted over preceding months. The softening in housing demand had flowed into weaker demand for new housing loans.”

The RBA also outlined a case for another 25-bp increase based squarely on the balance of inflation risks.

“One argument to raise the cash rate target by 25 basis points at this meeting was founded on an assessment of the risks to the inflation forecast. Members noted that if the risks around the inflation forecast were judged to be significantly skewed to the upside, it may be appropriate to mitigate those risks somewhat by tightening monetary policy pre-emptively,” the RBA said.

Members also considered whether the near-term economic cost of a faster return to target might be less acute than during other periods of inflation fighting.

“The case to raise the cash rate target at this meeting could also be further strengthened if members judged that the trade-off involved in bringing inflation down faster, was perhaps gentler than in some other historical episodes,” the minutes said.

MPB keeps tightening option open

Ultimately, the board decided that it would wait for additional evidence, with the minutes revealing that the MPB’s case for holding rested on the judgement that earlier increases may already be doing sufficient work to bring inflation back to target.

“The case to leave the cash rate target unchanged at this meeting relied on forming a judgement that, following the increases in the cash target earlier in the year, monetary policy appeared sufficiently restrictive to bring inflation back to target within a reasonable time frame,” the RBA said.

The board said the existing cash rate “appeared to be working to bring the economy gradually back into balance” and that incoming data had been consistent with that assessment.

However, the minutes revealed contrasting views on the likelihood of additional hikes.

“Several members judged that it was quite possible that the upside risks to the inflation forecast would crystallise, requiring some further tightening. Other members noted the potential for downside risks to offset them,” the minutes said.

ANZ sees November hike ‘risk’

Australia and New Zealand Banking Group (ANZ) said that its overarching forecast had not changed, with the bank expecting the cash rate to remain at 4.35 per cent until the second half of 2027.

However, it added that the minutes carried a more hawkish tone than the RBA’s August decision statement.

“The minutes read slightly more hawkishly than the statement following the August decision, with more focus on the upside inflation risks and less emphasis on the slowdown in activity,” ANZ said.

“On balance then, it is clear that the Monetary Policy Board retains a hawkish lean and will be sensitive to upside surprises in inflation or if activity shows signs of reaccelerating.”

While ANZ does not expect September’s meeting to deliver a hike, it said November could present a more material risk.

“We don’t think there will be enough new information for these risks to manifest by the September meeting. But the November meeting remains at least a risk for a hike, even if it is not our expectation,” the bank said.

CBA says September meeting is ‘live’

The Commonwealth Bank of Australia (CBA) similarly said the minutes suggested that the policy outlook was far from settled.

“The minutes of the August meeting add to the richness of discussions at the board table. The Minutes also showcase that reaching a consensus or a unanimous decision on the policy path from here may not be easy,” CBA said.

The bank said the RBA’s inflation concerns appeared to be intensifying while questioning whether the board’s language reflected frustration with the pace of progress.

“Despite this progress on the economy, the RBA staff judge that risks to inflation are tilted to the upside and the debate on the right policy response is getting more acute. Is the Board losing patience? Perhaps. Or is it jawboning to ensure financial conditions remain restrictive until we see meaningful progress on inflation? Also likely,” the bank said.

CBA said the September meeting should be treated as a “live” event, even while retaining its forecast for the RBA to remain on hold through the remainder of 2026.

“The Board seems split on the most likely next policy move and the debate is alive. The September meeting will be live,” CBA said.

[Related: Jobless uptick reduces chances of future hikes, majors say]