Statement on Monetary Policy – May 2026
In Brief
Inflation is likely to stay above the 2–3 per cent target range for some time. Inflation was already too high before the Middle East conflict and increased fuel prices have pushed it up further. Spending in the economy is expected to slow. The unemployment rate remains low but is expected to increase a bit.
What is going on in the economy?
Inflation has been increasing strongly since the middle of last year.
Prices were rising strongly across the economy before the Middle East conflict began and higher fuel prices have added to these pressures. Spending by Australian households and businesses has shown some signs of slowing this year, but the jobs market has remained strong.
How do we see the economy developing?
The economy is likely to slow this year.
Higher fuel prices and the interest rate increases this year are expected to lower spending by Australian households and businesses. These effects will be greater if the Middle East conflict is prolonged, but the global environment is unpredictable.
The jobs market is expected to remain healthy.
The unemployment rate is expected to stay around its current low levels until the middle of next year, then increase gradually after that.
Inflation is expected to be above the 2–3 per cent target range for a while longer.
Higher fuel prices are likely to push up the prices of other goods and services. We expect inflation to be significantly higher this year and to take some time to return to the target range.
What did the Monetary Policy Board decide?
At its May meeting, the Board decided to increase the cash rate to 4.35 per cent to help bring inflation down.
The Board is committed to delivering low and stable inflation and full employment in the economy.