Reserve Bank of Australia prioritizes inflation fight, signals possible rate hikes despite weakening property market

The Reserve Bank of Australia isn’t blinking. Assistant Governor Sarah Hunter made clear that the central bank’s board views elevated inflation as its primary concern and may need to push interest rates even higher to tame it. The numbers behind the hawkish tone The RBA held its cash rate at 4.35% following its August 2026 meeting, after implementing three rate hikes earlier in the year. Headline inflation slowed to around 4% year-on-year as of mid-2026, but underlying inflation remained stubbornly near 3.6%. The RBA’s target band sits at 2-3%, which means core price pressures are still running well above where the board wants them. The RBA’s own projections paint a sobering timeline. Inflation isn’t expected to return to the target midpoint until early 2028. Hunter’s language left little room for ambiguity. She stated that higher inflation outlooks imply rates “should be raised” to maintain targets. Where the pressure is building The persistent inflation isn’t coming from the usual suspects like imported goods or energy prices. The pressure is concentrated in services and non-tradables sectors, alongside external supply shocks. Meanwhile, unemployment is expected to rise to around...