Background: The Reserve Bank of Australia (RBA) is Australia's central bank and meets eight times a year to set the official cash rate. The cash rate flows through to home loans, credit cards and savings accounts across the country. So far in 2026, the RBA has been on a bit of a hiking spree, lifting rates three times already in an effort to keep inflation under control.

What happened: Yesterday, the RBA finally gave mortgage holders a breather. The Board voted unanimously to hold the cash rate at 4.35%... even though it says inflation is "still too high." So, no fourth hike... at least for now.

What else: The RBA is being squeezed from both sides: on one hand, oil prices jumped after the Middle East conflict (although that pressure has started to ease). On the other, consumer spending is slowing and house prices are falling in some capitals. So after three big rate hikes in a row, the RBA is basically doing what you do after three brutal gym sessions... resting to see if the gains actually kicked in.

What's the key learning?

💡 Raising interest rates doesn't fix inflation straight away... there's a delay between pulling the lever and feeling the effect. That delay is called the "monetary policy transmission lag." Meaning it can take 1 to 2 years for the full effect to show up in the data.

💡So the RBA is essentially walking a tightrope. If it waits too long, inflation can become deeply embedded in the economy. But if it hikes too aggressively, it risks pushing Australia into a recession.

💡After raising rates three times already this year, the RBA want to see if those hikes are doing the job before they make another move.