Story perspectives

RBA Hikes Rate to 4.35% as Inflation Near 4.8%

5/6/2026

Summary

RBA Hikes Rate

RBA raised cash rate by 25 basis points to 4.35% after an 8-1 board vote on 5 May 2026.
The bank expects headline inflation to peak near 4.8% in the June 2026 quarter, above its 2-3% target.
Governor Michele Bullock warned that upside inflation risks remain and further tightening cannot be ruled out.
Staff projections show the cash rate could reach about 4.70% by end-2026, implying a possible additional 40-basis-point hike.

Summary

Chalmers Announces Budget

Shadow Treasurer Tim Wilson accused Treasurer Jim Chalmers of “pouring debt petrol on the inflation fire” before the May 12 budget.
Chalmers said the budget will target fuel security, inflation-fighting, productivity gains and global economic uncertainty.
Business Council of Australia chief executive Bran Black warned pressure on households and urged spending cuts, while markets priced in another Reserve Bank of Australia (RBA) rate rise this year.

Summary

RBA Rate Hike

The Australian dollar slipped 0.3% to $0.7145 after the Reserve Bank of Australia's rate hike.
Three-year government bond yields fell 5 basis points to 4.625%, the lowest level in two weeks.
Markets give a 20% chance of a June hike and price a rise to 4.60% by September.
A $600,000 mortgage now costs over $270 more per month after three hikes.
Business and consumer confidence fell sharply after the decision.

History

Historical Context

In 1990 the Reserve Bank of Australia sharply raised the cash rate to combat significant inflation, a move that followed the 1983 float of the Australian dollar and a GDP of A$407 billion that year. Governor Michele Bullock has now raised rates again as Treasury officials debate ongoing debt-fuelled price pressures.

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RBA Hikes Rate

RBA raised cash rate by 25 basis points to 4.35% after an 8-1 board vote on 5 May 2026.
The bank expects headline inflation to peak near 4.8% in the June 2026 quarter, above its 2-3% target.
Governor Michele Bullock warned that upside inflation risks remain and further tightening cannot be ruled out.
Staff projections show the cash rate could reach about 4.70% by end-2026, implying a possible additional 40-basis-point hike.

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