RBA hikes interest rates: “It is a very tough time”

2 days ago 3

Our coverage of the RBA rates announcement for May 2026 has finished.

The RBA has hiked interest rates to 4.35% in a largely expected move following last week’s significant headline inflation spike.

Read our full coverage of the latest interest rate hike here.

Jump to key updates

3:58 pm ‘Very tough time’ expected for the rest of the year, RBA warns
2:42 pm What the RBA’s rate rise will mean for your mortgage
2:30 pm RBA hikes the cash rate to 4.35%
1:31 pm Australia’s four big banks anticipating an interest rate rise
12:32 pm Economist prediction: Another rate hike expected today

Many economists expect RBA governor Michele Bullock to announce another cash rate hike in May. Picture: Martin Ollman

Thank you for joining us for this interest rates decision

4:31 pm

Thank you for joining us for the fourth RBA monetary policy board cash rate decision for 2026. To recap, the board has decided to raise the cash rate for the third consecutive time.

Confirmation of another rate hike for 2026 means all the RBA’s easing from 2025 has been fully reversed, returning the cash rate to the same position it was at the end of 2024.

In the media press conference following the announcement, governor Michele Bullock said high inflation caused by the conflict in the Middle East, along with excess demand in the economy and high state and federal government and private sector spending meant more tightening was necessary.

The next cash rate decision will come on 16 June. In the meantime, keep up to date with all the news on realestate.com.au and Mortgage Choice in the lead up, as well as outlooks from our team of in-house economists, forecasts, inflation data, policy announcements and more.

RBA governor: ‘I worry about employment’

4:12 pm

Governor Michele Bullock has pushed back on suggestions the bank may not be giving equal weight to both parts of its dual mandate of price stability and full employment, explaining the importance of one meeting one objective can sometimes outweigh the emphasis on the other.

“I do worry about unemployment,” Ms Bullock said in her post-rate hike press conference this afternoon. “I worry about it for people who are paying mortgages because the best way for them to continue to meet their commitments is to have a job.”

Ms Bullock added: “Quite apart from that, having a job is really important for people’s self-worth and self-esteem – there are good reasons we don’t want unemployment rising too much.

“We still see employment growing, it just might mean it’s taking a little longer for people to get jobs. If we can keep employment growing, it is the most positive thing we can do.”

‘Very tough time’ expected for the rest of the year, RBA warns

3:58 pm

All Australians – not just those with mortgages and debt – should gear up for a “very tough time” in 2026 when it comes to household finances, governor Michele Bullock has warned.

Responding to media questioning following the bank’s third consecutive cash rate hike this afternoon, Ms Bullock confirmed Australia is “staring down the barrel” with high inflation “hurting immensely”.

“It’s hard and there’s nothing we can do about the shock with all prices and interest rate rises will not do anything about that,” she said. “We are going to see inflation peak, probably in June. It will then come down, if oil prices decline.

“Even if the conflict is resolved quite quickly, the effects are going on for the rest of the year and the oil price does not get back to where it was pre-war, so we are still in a worse position in terms of the costs to society.

"It is a very tough time."

RBA: Spending must slow down

3:44 pm

Governor Michele Bullock has called on both the government and households to limit spending as the fight to control inflation in Australia intensifies.

Addressing media following the bank’s decision to hike the cash rate to 4.35% today, Ms Bullock said the extent to which the government is demanding goods and services is adding to demand.

“When inflation is already too high and the economy is facing capacity pressures, it doesn’t take much additional spending to make the job of returning inflation to target more challenging,” she warned.

“The ability of the economy to supply the goods and services being demanded including by the government and the private sector – was outstripping the ability of the economy to supply it.

“I understand this is a really difficult time for households, but we must get on top of inflation now before it gets away from us. This means spending will need to grow more slowly for a time to help restore the balance between demand and supply.”

RBA governor set for tough media questioning

3:29 pm

Governor Michele Bullock is set to address the media shortly, providing a closer look into board members’ discussions ahead of this afternoon’s decision to hike the cash rate once again.

Ms Bullock will likely speak about global volatility and the continued difficulties the bank faces trying to accurately forecast, as well as shed light on why some board members were pushing for a rate hold this month instead.

A breakdown of the board’s short- and medium-term economic outlook following the decision to tighten further is also expected, along with questions from journalists on when the board will have a clearer picture of the trajectory of inflation.

Fast-evolving pressures out of the Middle East are expected to be the focal point of journalists’ questions, along with recent commentary from RBA deputy governor Andrew Hauser about the government support he has suggested it is lacking when it comes to cash rate decisions.

Latest RBA inflation forecasts revealed

3:13 pm

Headline inflation is not expected to drop down into the 2-3% target range until mid 2027 at the earliest, the RBA has confirmed, with underlying inflation expected to take even longer.

“Inflation was already too high before the Middle East conflict and increased fuel prices have pushed it up further,” the RBA said.

A new baseline forecast accompanying today’s rate hike confirms underlying inflation will peak higher than the bank had previously forecast, but timelines are reliant on the conflict in the Middle East being resolved soon, as well as the continued drop in fuel prices. Underlying inflation does not consider the most volatile price highs or lows, meaning it is the most accurate measure of inflation in the economy.

“There are materially heightened uncertainties about the outlook for domestic economic activity and inflation,” the RBA said. “With the conflict in the Middle East continuing, there are plausible scenarios where inflation is higher and activity lower than envisaged.”

RBA says worst inflation effects yet to come

2:57 pm

The Reserve Bank has confirmed its latest interest rate hike is centred around its concerns that inflation – currently at a near three-year high – is yet to have its full impact in Australia.

“Higher fuel prices are adding to inflation and there are indications that this is likely to have second-round effects on prices for goods and services more broadly,” the RBA said. “This inflation impulse is in addition to the high inflation recorded around the start of 2026.”

In a statement accompanying the decision to increase the cash rate today for a third consecutive time, it was revealed eight of nine monetary policy board members voted for a hike.

“A longer or more severe conflict could put further upward pressure on global energy prices,” the statement read. “This would push up near-term inflation and could also increase inflation further out as these costs are passed through and if price rises get built into longer term inflation expectations.”

What the RBA’s rate rise will mean for your mortgage

2:42 pm

The RBA’s announcement that the cash rate has increased to 4.35% could have an impact on home loan repayments as early as the end of this month, depending on lender repayment cycles.

Mortgage Choice has calculated the extra amount that borrowers with various mortgage levels will soon need to pay, if their lender passes on today’s cash rate hike.

The figures are rounded to the nearest $10 for ease and assume a starting rate of 6.26%.

Outstanding home loan	Current monthly repayments	Monthly repayments with a hike	Monthly extra cost	Annual extra cost
$1,000,000	$6170	$6330	$160	$1920
$750,000	$4630	$4750	$120	$1440
$500,000	$3090	$3170	$80	$960
$250,000	$1540	$1580	$40	$480

Borrowers with fixed rates will not see any change from today’s rate hike but may face higher variable rates if their fixed term is set to expire shortly and they choose not to lock in once again.

RBA hikes the cash rate to 4.35%

2:30 pm

The Reserve Bank has increased the cash rate to 4.35% in a largely expected move following last week’s significant headline inflation spike. This marks the third consecutive hike from the bank and officially cancels out the triple rate easing homeowners enjoyed last year.

Borrowers are in for a bumpy ride now, with interest rates back to the same conditions as 2024. Cost of living pressures – already mounting throughout March and April – are set to continue into the winter as war in the Middle East continues, choking global oil availability and disrupting vital supply chains.

Households are also inline for higher minimum mortgage repayments, with lenders expected to pass on today’s cuts and business and operational cost increases bite.

This was the board’s third meeting for 2026, concluding its two-day deliberations. A deeper dive into the context around the board’s decision is expected in an accompanying statement in the next few minutes, along with latest expectations on how inflation, growth, and labour market conditions are faring.

Markets pricing in an interest rate hike today

2:16 pm

Market expectations for an interest rate rise have been consistently high over the last two weeks, with the latest data from the Australian Stock Exchange showing there was a 69% expectation for a rate increase as of Friday. Adding a further 0.25% to the cash rate will bring it to 4.35%.

While expectations for another rate hike have remained relatively stable throughout April, it’s a less confident percentage compared with earlier last week before the most recent inflation statistics were published.

While inflation is too high, the inflation figure came in below economist forecasts, and underlying inflation has not ticked upwards since December. At 3.3%, the trimmed mean inflation number – which strips out fuel price volatility in its calculation – is still well above the RBA’s 2-3% target range.

The RBA Rate Indicator calculates the probability of a rate change using market-determined pricing from the ASX 30-Day Interbank Cash Rate Futures.

RBA battling against public expectations for inflation

1:56 pm

Regardless of how the RBA decides to move the needle on the cash rate today, holding onto consumer confidence will likely be high on its priority list.

Speaking at an International Monetary Fund event earlier this month, assistant governor Sarah Hunter said the RBA’s credibility depends on Australians believing that low, stable inflation is achievable.

“For me, it’s all about what that does to the monetary policy trade-off,” she questioned. “How much of an impact on inflation does it have, and inflation expectations, and how much of an impact on activity? Inflation expectations have to be the north star in all of this – the credibility of the institution.”

Whether that confidence will hold as households face unusual supply shocks, and whether it will help prevent unexpected shifts in spending, remains uncertain. After acknowledging recent forecasting difficulties, a clearer view of consumption trends could go a long way to untangling the bank’s predictions.

Third consecutive rate hike reverses 2025 easing

1:43 pm

This afternoon could well mark a full circle for Australia’s rates cycle if the Reserve Bank tightens policy yet again. It will be unchartered waters for many Aussies in the property market, with 2010 marking the last time the bank both cut and raised rates within one year.

After easing policy in 2025 to gradually bring down inflation, the RBA is now on the edge to undoing that shift entirely. A stagflation-style combination of high inflation, continued spending and resilient employment continue to complicate the economy outlook.

Scrutiny is expected to be on both the RBA’s timings and its communications, with households shouldering the full effects of volatile interest rates, going from three cuts to three hikes in just 13 months.

The last time Aussies experienced three rate hikes and three rate cuts within in that timeframe was during the initial post-Global Financial Crisis recovery period in late 2008 and 2009.

Australia’s four big banks anticipating an interest rate rise

1:31 pm

Around 75% of Aussies with a mortgage hold their home loan with either Commonwealth Bank, ANZ, Westpac and National Australia Bank; all four are predicting a rate rise today.

There has been little movement from the banks over the last few weeks when it comes to forecasting, with hike expectations well and truly locked in amid continued economic uncertainty stemming from the Iran War.

CBA, ANZ and NAB are aligned in expecting a prolonged period with rates on hold after today, a forecast that will see households returning to higher rates at the norm.

Westpac has the most hawkish view and is the outlier of the four, predicting a rate rise today will be the first of a further three consecutive hikes. Westpac chief economist Luci Ellis made the grim call at the end of last month, citing concerns over the accessibility of the Strait of Hormuz as the key factor.

Home price growth cooling since March hike

1:14 pm

National home prices dipped in April, marking a turning point for Australia’s strong property market and the first drop for this year.

Two consecutive rate cuts dampened borrower confidence last month, while rising inflation is also constricting borrowing powers and pricing would-be buyers out of the market. For the second month in a row, unit prices fared better than house prices, suggesting a move towards more affordable properties.

National home prices dropped 0.1% over the month, reducing the national median home value to $910,000. Despite this, prices are still 8.5% higher than they were 12 months ago.

Sydney (-0.5%) and Melbourne (-0.3%) were the only capitals to see price declines in April, while the nation’s second cheapest capital, Hobart, saw the highest growth with 0.3%. Brisbane, Perth and Adelaide recorded price growth of 0.2%, while Darwin saw an 0.1% uplift and prices in the Australian Capital Territory remained flat.

RBA pushing government for support on interest rate decisions

12:59 pm

The Reserve Bank’s traditional tight-lipped approach to handling questions around its relationship with the government has taken another turn in recent weeks as the 2026 Federal Budget approaches.

Speaking in New York on 14 April, deputy governor Andrew Hauser said the Reserve Bank needs “rock solid support from governments” as it makes hard decisions over how to reign in inflation, while also dealing with the global oil crisis.

“You need to be very clear what you can’t do, because people are maybe thinking that monetary policy can solve everything,” he said. “We have to be clear that what monetary policy can do, which is anchor inflation and inflation expectations.”

The comments come off the back of a tense time for government and central bank relations, after governor Michele Bullock stated earlier this year that government spending, as a component of aggregate demand, was putting too much pressure on the economy.

War in the Middle East continues to threaten inflation

12:44 pm

Imported fuel costs feed directly into transport, logistics and supermarket prices in Australia, which has underpinned inflation – which was already too high ahead of the global fuel shock - in the lead up to today’s monetary policy board meeting.

That means higher prices are sticking around longer than expected, even with policy measures like the February and March rate cuts, which should be making a noticeable impact dampening conditions.

It comes as global energy markets are continuing to react to the conflict in the Middle East, which is now in its tenth week. Supply fears are continuing to keep oil prices higher than usual, meaning the RBA will be looking to make swift moves to protect the economy from the risk of ‘stagflation’ (where high inflation and unemployment mix uncharacteristically with slow economic growth).

In a housing market already sensitive to both rate cuts and buyer sentiment, continuing Middle East conflict means an increased risk of mortgage rates remaining elevated throughout 2026.

Economist prediction: Another rate hike expected today

12:32 pm

The realestate.com.au economist team have forecast another rate hike for today as the pressures from the Iran War continue to be felt by Australian households.

Following last week’s uncomfortably high headline inflation data, pressure will be on the Reserve Bank to use its lever of interest rates to try and take back some control.

Headline CPI increased over the 12 months to March, jumping to a whopping 4.6%, up from February’s 3.7% reading.

“This represents the highest level for inflation seen since September 2023 and is well above the Reserve Bank's target range of between 2-3%,” REA Group senior economist Anne Flaherty warned. “The figures increase the chances the Reserve Bank will increase the cash rate.”

While the RBA prefers to judge the state of the economy off the trimmed mean figure – the inflation reading that leaves out the month’s biggest price shocks – Ms Flaherty said conditions did were not promising enough to prevent another hike.

Surging inflation likely to back RBA into a corner

12:13 pm

Inflation is moving swiftly out of control in Australia yet again, with new figures from the Australian Bureau of Statistics last week confirming both headline and trimmed mean inflation are well outside the RBA’s 2-3% target range.

While headline inflation hit a near three-year high of 4.6% over the year to March, the RBA also looks at what’s called the ‘trimmed mean’ to make interest rate decisions.

The trimmed mean is less volatile and in the case of March, discounts fuel price changes. Annual trimmed mean is sitting at 3.3%, the same as where it was in February. With trimmed mean outside the target range but remaining steady for a fourth month in a row, could households be spared the extra pressure of a hike? Yes, but likely not.

Communications from the bank in recent weeks make it clear how much of a threat it considers high inflation is in the long term.

Interest rates are the only measure the RBA has in its arsenal to try and rein in inflation in, so a rate hike today is highly expected.

Welcome to our live coverage of today’s RBA cash rate decision

12:01 pm

The Reserve Bank of Australia’s (RBA) monetary policy board is currently wrapping up two days of deliberations and discussion on the future of Australia’s 4.1% cash rate.

A decision on whether or not the rate will be increased for a third time in a row is expected in just over two hours’ time, with more tightening widely expected.

Forecasts for yet another rate hike have been a bitter pill for Australians to swallow since the bank last raised interest rates in March, with many households continuing to struggle as inflation rises. Minimum mortgage repayments have already risen twice this year for the majority of households, with cost of living concerns on the rise.

We’ll be here for the next few hours to share all the latest news, updates and forecasts from leading economists, property and home financing insiders and major banks. Follow along to see how today’s decision will play out.

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