Private Credit Weekly Insights - 22 June 2026

The Reserve Bank of Australia (RBA) left the cash rate unchanged at 4.35% at its June meeting, pausing after three consecutive rate increases earlier this year. While the decision was widely expected, Governor Michele Bullock stressed that the Board remains prepared to tighten policy further if inflation risks intensify.

The RBA acknowledged growing signs that higher interest rates are slowing the economy, with softer consumer spending, a weakening labour market and declining housing activity. This moderation in activity is a necessary part of the disinflation process, as the RBA continues to view the risk of inflation becoming embedded in wage and price-setting behaviour as a key concern. Bullock warned that if inflation expectations become entrenched, additional monetary tightening would be required to restore price stability.

Following the decision, bond markets reduced the implied probability of another rate increase to around 50% by year-end, while some pricing for a rate cut later in 2026 has emerged amid concerns over weakening growth. However, a number of economists continue to advocate for further tightening, noting that the expected timeline for returning inflation to the RBA's target range has been repeatedly extended. This view could gain further traction if the June quarter CPI, due just two weeks before the August Board meeting, prints in line with expectations, confirming that inflation remains stubbornly elevated.

The Board also highlighted increased global uncertainty. While recent progress towards restoring stability in the Middle East may ease energy price pressures over time, policymakers noted that inflation risks remain skewed to the upside. Domestically, proposed changes to housing tax policy have added uncertainty to an already softening housing market.

The June decision was a pause rather than a pivot. The RBA believes policy is already restrictive and is allowing time for previous rate increases to work through the economy. However, with inflation still well above target, further tightening remains a realistic possibility, and upcoming June quarter inflation data will be critical in determining the next policy move.

Source: Reserve Bank of Australia, Monetary Policy Decision, June 2026.