Reserve Bank's tough stance could spell bad news for Aussies over fears of another interest rate hike in August

By SARAH BROOKES - SENIOR REPORTER, AUSTRALIA Published: 06:09, 30 June 2026 | Updated: 06:09, 30 June 2026 The Reserve Bank has made it clear it will do 'what it considers necessary' to tame stubborn inflation even if that means another rate hike.  Minutes from the RBA board's June 16 meeting released on Tuesday show policymakers remain concerned underlying inflation is still too high despite some recent signs of easing price pressures. The central bank unanimously held the cash rate at 4.35 per cent, ending a bruising run of three consecutive hikes. The RBA acknowledged falling oil prices and stronger share markets, while noting the three rate hikes delivered so far this year were having their intended effect on the economy. Australian Bureau of Statistics data showed the consumer price index fell to four per cent in the 12 months to May, down from 4.2 per cent in April. While headline inflation dipped, the trimmed mean, the measure preferred by the RBA, rose from 3.4 per cent in April to 3.6 per cent in May. Despite recent signs of easing inflation, the RBA said underlying price pressures remained too high and were expected to rise in the June quarter. The central bank also warned it could take another two years for inflation to return sustainably to its target range, raising fears of another rate hike in August. The Reserve Bank has made it clear it will do 'what it considers necessary' to tame stubborn inflation even if that means another rate hike (pictured, RBA governor Michele Bullock) '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 minutes said. The board noted housing demand had weakened amid a softer economic backdrop and the prospect of proposed tax changes. But it made clear further rate hikes remain on the table. 'The Board will remain focused on its mandate to deliver price stability and full employment and will do what it considers necessary to achieve that outcome, including increasing the cash rate target if necessary,' the minutes said. Despite softer inflation readings in recent months, policymakers warned underlying inflation remains elevated and is expected to increase in the June quarter. The board said cost pressures were still widespread across the economy, with many businesses continuing to pass higher expenses on to consumers. AMP chief economist Shane Oliver forecast the odds of another August rate rise are 60 per cent, three times higher than financial markets currently expect. He said underlying inflation remains stubbornly high, while the effects of higher oil prices continue to flow through the economy and stronger wage growth is adding to business costs. Softer-than-expected inflation figures for the June quarter, combined with signs that previous rate hikes are cooling the housing market, could persuade the RBA to stay on hold (stock image) At the same time, recent jobs and household spending data suggest the economy is holding up better than expected despite three rate hikes already this year. 'With the trend remaining up in trimmed mean inflation, second round impacts of the oil supply shock still feeding through and the acceleration in minimum and award wages likely to add to costs and prices, at the same time that May data for jobs and household spending indicate that the economy is still holding up well, we remain of the view that the RBA will raise the cash rate again with the next hike in August,' Mr Oliver said. However, Mr Oliver said an August rate rise was far from guaranteed. Softer-than-expected inflation figures for the June quarter, combined with signs that previous rate hikes are cooling the housing market, could persuade the RBA to stay on hold. 'That said the risks to June quarter trimmed mean inflation are slightly on the downside to the 3.8 per cent year-on-year forecast and along with evidence that rate hikes are working to cool property prices means that an August hike is not a certainty,' he said. Even so, Mr Oliver believes financial markets may be underestimating the risk. 'We would put the probability at 60 per cent, which is well above the money market's 20 per cent,' he said. The comments below have not been moderated. The views expressed in the contents above are those of our users and do not necessarily reflect the views of MailOnline. By posting your comment you agree to our house rules. Do you want to automatically post your MailOnline comments to your Facebook Timeline? Your comment will be posted to MailOnline as usual. 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