RBA August 2026 Rate Decision — Will the Third Hold Hold?
With trimmed-mean inflation still at 3.6%, the August RBA decision hinges on the 29 July Q2 CPI print. We map the scenarios markets may be underpricing.
Bottom Line
The case for an August rate rise is stronger than the market's 19% probability implies — but the decision rests almost entirely on the Q2 CPI print due 29 July. If quarterly trimmed-mean inflation holds at or above its current run-rate (~3.6%), the Board will have little room to hold for a third consecutive meeting. If it softens toward 3.3–3.4%, another hold becomes the likely path.
Holding three meetings in a row while underlying inflation sits at 3.6% is a finely balanced stance, and August is the meeting where that gap is most likely to be tested.
Per-Dimension Analysis
1. Inflation — Still Above Target
Trimmed-mean CPI printed at 3.6% in May — above the RBA's 2–3% target band and above market consensus of 3.5%. Headline CPI sits at 4.0%. The RBA's own statement acknowledged inflation "remains too high" and signalled it would tighten "if required."
The June-quarter CPI is released 29 July, just 13 days before the August meeting — the key data point. A hot Q2 print would leave little cover for another hold.
2. Is the RBA Behind the Curve?
The Board has now held twice (June and July) with trimmed mean at 3.6%, headline at 4.0%, and energy prices elevated. Each hold at this level of inflation arguably builds the case for a larger move later. The alternative reading — that these are deliberate pauses to let prior tightening flow through — depends on inflation easing from here, which the data has not yet confirmed.
3. Market Consensus May Be Complacent
Markets price only 19% for a hike, implying confidence the Board will prioritise weak GDP growth (0.3%) over the inflation overshoot. That is a plausible read, but it leans on price stability taking a back seat — and 3.6% trimmed mean is some distance from target. The risk is that the market is pricing the outcome the RBA would prefer rather than the one the data may force.
4. Growth Weakness Cuts Both Ways
GDP grew just 0.3% in the March quarter — clearly weak. But the RBA's framework can look through temporary softness when inflation is the dominant risk. That sets up a genuine tension: weak growth and sticky inflation pulling in opposite directions, with no comfortable option for the Board.
Scenario Table
| Scenario | Likely RBA Response | Market Pricing |
|---|---|---|
| Q2 CPI hot (≥3.6% trimmed mean) | Hike becomes hard to avoid | ~30–40% |
| Q2 CPI moderate (3.3–3.5%) | Hold, with a hawkish statement | ~60–70% |
| Q2 CPI soft (<3.3%) | Hold, and talk of cuts begins | ~80%+ |
Key Dates
- 29 July 2026 — Q2 2026 CPI release (the swing factor)
- 11 August 2026 — RBA Board meeting (next rate decision)
This analysis is provided for general information only and does not constitute financial advice. Figures are drawn from publicly available ABS and RBA releases.