The Reserve Bank of Australia just told markets what they probably didn’t want to hear: three rate hikes might not be enough.
After raising the cash rate by 25 basis points to 4.35% on May 5, the RBA acknowledged that its tightening measures are filtering through to inflation and financial conditions. But the central bank left the door wide open for additional increases if inflation risks don’t ease.
Three hikes and counting
The RBA has now delivered three consecutive rate increases in 2026, starting the year at 3.60% and steadily marching the cash rate up through February, March, and May. That 3.60% starting point was itself the product of easing measures adopted in 2025, when the central bank had been cautiously cutting rates.
The reversal is driven by one stubborn number: headline inflation hit 4.6% in March 2026, the highest reading since 2023. That’s well above the RBA’s 2-3% target band. Short-term inflation expectations have also risen notably.
