RBA’s Bullock Signals Fourth Rate Hike as Inflation Stays Above Target

Reserve Bank Governor Michele Bullock delivered her starkest warning yet on July 28 that the RBA may raise the cash rate further if inflation does not return to target. Underlying inflation sits at 3.6%, well above the central bank’s 2-3% goal. She said the board is prepared to act as required, including lifting rates at the August 11 meeting if needed. However, softer-than-expected CPI data released July 29 has cut market odds of an August hike to near zero.

What Bullock said about the next rate move

Bullock told the Anika Foundation in Sydney on Tuesday that inflation had risen and remained above target, even before recent oil price spikes. She stated the board is prepared to increase the cash rate further if needed to achieve its inflation mandate. If the RBA raises rates to 4.60% at its next meeting on August 11, it would be the highest setting since 2011. Three of the big four banks, Commonwealth Bank, NAB and ANZ, predict the RBA will hold rates for the rest of the year before delivering cuts in 2027. Westpac forecasts two more hikes this year, followed by two cuts next year.

Why inflation remains sticky despite three rate hikes

The RBA has already raised rates three times in 2026. Underlying inflation, measured by the trimmed mean, sits at 3.6%, stubbornly above the 2-3% target. Bullock warned that weak productivity growth in Australia has weighed on real incomes and wages for years. She said the economy cannot grow strongly without putting upward pressure on inflation. Housing costs rose 6.8% in the year to June, and services inflation remained persistent, particularly in rents.

How July 29 inflation data changed the outlook

The Australian Bureau of Statistics reported on July 29 that the consumer price index rose 3.8% in the year to June, down from 4.0% in May. The trimmed mean held steady at 3.6%. Financial markets cut the chances of an August rate rise to close to zero after the softer-than-expected report. However, renewed conflict in the Middle East sent oil prices above USD 100 a barrel, creating fresh inflation risks not yet reflected in the June data.

What this means for Australian households

Bullock warned that if inflation keeps rising, the RBA will be prepared to lift rates even higher. She also cautioned that bringing inflation back down may require an increase in unemployment. Two-thirds of Australians surveyed by the RBA cited inflation as their biggest economic concern. The RBA’s dual mandate is to keep inflation low and stable while supporting full employment, a trade-off that has become more challenging in a shock-prone world.

Final Thoughts

Bullock’s July 28 warning signaled the RBA remains hawkish, but July 29 inflation data and market reaction suggest an August hike is unlikely. The board will reassess at its August 11 meeting, with the path forward hinging on whether inflation continues to ease or oil shocks reignite price pressures.

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