Statement on Monetary Policy – August 2026
In Brief
Inflation is still too high and is not expected to return to the middle of our 2–3 per cent target range until early 2028. Spending in the economy will need to slow to bring inflation down. The unemployment rate has increased a little this year and is expected to continue to increase gradually.
What is going on in the economy?
Inflation is still too high.
High inflation has been driven by ongoing price pressures in Australia as well as energy cost pressures associated with the Middle East conflict. Total spending appears to be slowing, and housing prices have declined noticeably. The jobs market remains strong overall, although the unemployment rate has risen a little.
How do we see the economy developing?
The economy is expected to slow this year.
The interest rate increases from earlier in the year are yet to have their full effect, which means total spending is expected to slow.
The unemployment rate is expected to increase gradually.
As the economy slows, we expect employment to grow at a slower pace, and the unemployment rate to rise gradually.
Inflation is not expected to return to the middle of the target range until early 2028.
Price pressures in Australia and cost pressures from the Middle East conflict will keep inflation elevated in the near term. Inflation is expected to gradually return to the target range as the economy slows.
What did the Monetary Policy Board decide?
At its August meeting, the Board decided to leave the cash rate target unchanged at 4.35 per cent.
Inflation remains too high and the Board remains focused on returning it to target. This means the economy will need to slow. The Board has raised the cash rate three times since the start of the year and will assess how the economy is responding.