RBA Holds at 4.35% — But Bullock Keeps the Door Open for More Hikes

The Reserve Bank of Australia (RBA) held its Official Cash Rate steady at 4.35% on Tuesday in a unanimous decision, pausing after three consecutive 25 basis point hikes earlier this year. AUD/USD dropped 0.27% to 0.7155 in immediate reaction — the Australian Dollar the weakest performer across the major currency board.

Bullock's Key Messages

Governor Michele Bullock struck a cautiously hawkish tone at the post-meeting press conference, refusing to declare the tightening cycle over.

┌──────────────────────────────────┬──────────────────────────────────────────────┐
│ Theme                            │ Bullock's Position                           │
├──────────────────────────────────┼──────────────────────────────────────────────┤
│ Inflation                        │ Still too high; risks remain on the upside   │
│ Further hikes                    │ Cannot be ruled out if needed                │
│ Economic contraction             │ Not forecasted this quarter                  │
│ Housing market cooling           │ Too early to factor into policy              │
│ Labor market                     │ Still "a little bit tight" at 4.5% UR        │
│ Oil prices / Hormuz              │ Current oil prices in line with forecasts    │
│ Middle East peace deal           │ "Welcome news" — watching closely            │
└──────────────────────────────────┴──────────────────────────────────────────────┘

Why the Pause — And Why It May Not Last

The RBA's decision reflects a genuine growth-inflation tension. Australia's GDP expanded just 0.3% QoQ in Q1, missing the 0.5% forecast and slowing sharply from 0.9% prior. Annual growth came in at 2.5%, below the 2.7% expected. The unemployment rate has risen to 4.5%, the highest since September, while monthly CPI eased to 4.2% annually in April.

Yet inflation remains well above the RBA's 2–3% target, and Bullock made clear the board is not ready to pivot. Markets are reflecting that ambiguity: according to Reuters, the implied probability of an August rate hike has collapsed to just 22%, down from 80% a month ago.

Three of Australia's four major banks — NAB, CBA, and ANZ — now expect the cash rate to stay at 4.35% for the rest of 2026. Notably, NAB broke from consensus earlier by suggesting the RBA's next move could eventually be a cut, not a hike.

"It'll be about the little clues as to whether the cycle is over or it's still alive — that's going to be really important for both the Aussie and the kiwi markets," said Imre Speizer, strategist at Westpac.

AUD/USD Technical Snapshot

┌─────────────────────┬────────────────────────────────────────────────────────┐
│ Level               │ Significance                                           │
├─────────────────────┼────────────────────────────────────────────────────────┤
│ 0.7084              │ 100-day SMA — immediate resistance                     │
│ 0.7116              │ 21-day SMA — next hurdle on recovery                  │
│ 0.7143              │ 50-day SMA — must reclaim to ease downside pressure   │
│ 0.6844              │ 200-day SMA — major support; break opens deeper slide │
│ RSI (14-day)        │ Bounced from oversold but still in bearish zone       │
└─────────────────────┴────────────────────────────────────────────────────────┘

Southeast Asia Trader Outlook

For traders across Singapore, Malaysia, and Indonesia, AUD remains a key proxy for regional risk sentiment and commodity exposure. A prolonged RBA pause at 4.35% narrows the rate differential with other central banks, keeping AUD under pressure near-term.

Wednesday's Fed decision adds another layer — a hawkish Warsh would further strengthen USD, extending AUD/USD downside. Watch the 0.7084 100-day SMA as the immediate line in the sand.

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Sources: RBA Monetary Policy Statement, Reuters, Westpac (Imre Speizer), ABS, FXStreet.