25.08.202601:53:41UTC+00RBA Flags Inflation Risks Despite Policy Hold: August Meeting Minutes

Australia’s inflation has eased from its March peak, with underlying price pressures now slightly lower than in late 2025, according to the Reserve Bank’s August meeting minutes. Even so, the board judged that inflation remains “too high,” with excess demand still evident in the economy. At the same time, financial conditions were viewed as somewhat restrictive, reflecting the impact of previous rate increases.

RBA staff forecast that inflation will only gradually return to target by late 2027, and assessed the balance of risks as tilted to the upside. Those arguing for a 25-basis-point rate increase pointed to several such risks: the potential for Middle East tensions to push oil prices higher, firms passing on costs more fully to consumers, stronger investment in AI and data centres, resilient domestic demand, and persistently weak productivity growth.

The case for keeping rates on hold rested on accumulating evidence that monetary policy is already restrictive, recent inflation outcomes running slightly below earlier forecasts, and a rise in unemployment. Downside risks to the outlook included a sharper-than-expected easing in labour market conditions, weaker overall demand, and a more pronounced drag from the housing sector.

In the end, policymakers left interest rates unchanged but reiterated that they stand ready to tighten policy further if upside inflation risks materialise.