Reserve Bank of Australia (RBA) Governor Michele Bullock is speaking at the press conference, explaining the reasons behind raising the benchmark interest rate by 25 basis points (bps) to 4.35% after the May monetary policy meeting.
Bullock is taking questions from the press as part of a new reporting format introduced by the central bank last year.
Key quotes from the RBA Press Conference
The interest rate increase will help contain inflationary shock.
If second-round effects feed through to expectations, then it could require even higher rates.
The Cash Rate level is now a bit restrictive.
That gives us space to see how the conflict plays out.
“Wait and watch” is probably the wrong term to describe current stance.
We feel we are now in a position where we’ve got space to be alert to both sides of the risks to inflation outlook.
This is a shock to real incomes, makes us poorer.
If economic conditions change, we will change.
This oil shock has made the trade-off between inflation and growth worse.
Even if conflict is resolved quickly, costs will mount all year.
With this hike, have space to sit and see what happens.
Developing story, please refresh the page for updates.
Economic Indicator
RBA Press Conference
Following the Reserve Bank of Australia’s (RBA) economic policy decision, the Governor delivers a press conference explaining the monetary policy decision. The usual format is a roughly one-hour presser starting with prepared remarks and then opening to questions from the press. Hawkish comments tend to boost the Australian Dollar (AUD), while on the opposite, a dovish message tends to weaken it.
Read more.
This section below was published at 04:30 GMT to cover the Reserve Bank of Australia’s monetary policy announcements and the initial market reaction.
The Reserve Bank of Australia (RBA) announced on Tuesday that it hiked the Official Cash Rate (OCR) by 25 basis points (bps) to 4.35% from 4.10% after concluding its May monetary policy meeting.
The decision aligned with the market expectations.
Summary of the RBA Monetary Policy Statement
Board raises cash rate target by 25 basis points to 4.35% at today’s meeting.
Today’s policy decision reached by majority.
RBA board will monitor data and changing outlook risks to steer decisions.
Labor market remains somewhat constrained.
Rising fuel costs contribute to inflation and may trigger broader price increases for goods and services.
Significant increase in uncertainty over domestic economic outlook and inflation.
RBA warns Australia may encounter physical shortages of oil products, prices could rise further.
Decline in consumer and business confidence surveys loosely linked to actual activity.
Many companies in contact have yet to transfer higher costs, more now anticipate above-average price increases.
Unclear how tight financial conditions are, may be neutral or mildly restrictive.
RBA updated economic forecasts
GDP projected at 1.9% in Q2, 1.3% in Q2 2027, 1.4% in Q2 2028.
Unemployment projected at 4.2% in Q2, rising to 4.7% by Q2 2028.
CPI inflation projected at 4.8% in Q2, 4.0% in Q4, 2.4% in Q2 2027, 2.5% in Q2 2028.
Trimmed mean inflation forecast at 3.8% in Q2, 3.5% in Q4, 3.1% in Q2 2027, 2.5% in Q2 2028.
60bps more hikes to 4.7%, Brent drops to $82.3 by year-end, $75.7 end 2027.
AUD/USD reaction to the RBA interest rate decision
The Australian Dollar attracts some buyers in an immediate reaction to the RBA’s decision. At the time of writing, the AUD/USD pair is down 0.06% on the day at 0.7162.
Australian Dollar Price This week
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies this week. Australian Dollar was the strongest against the Euro.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.55% | 0.55% | 0.36% | 0.26% | 0.69% | 0.51% | 0.51% | |
| EUR | -0.55% | -0.01% | -0.20% | -0.29% | 0.20% | -0.03% | -0.00% | |
| GBP | -0.55% | 0.01% | -0.19% | -0.28% | 0.20% | -0.02% | -0.00% | |
| JPY | -0.36% | 0.20% | 0.19% | -0.05% | 0.38% | 0.23% | 0.13% | |
| CAD | -0.26% | 0.29% | 0.28% | 0.05% | 0.46% | 0.28% | 0.27% | |
| AUD | -0.69% | -0.20% | -0.20% | -0.38% | -0.46% | -0.22% | -0.21% | |
| NZD | -0.51% | 0.03% | 0.02% | -0.23% | -0.28% | 0.22% | 0.02% | |
| CHF | -0.51% | 0.00% | 0.00% | -0.13% | -0.27% | 0.21% | -0.02% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
This section below was published on May 4 at 22:45 GMT as a preview of the Reserve Bank of Australia’s monetary policy announcements.
- The Reserve Bank of Australia is expected to hike interest rates to 4.35%.
- Eyes on RBA Governor Bullock’s press conference and hints on additional hikes ahead.
- The Australian Dollar trades near multi-year highs, bullish momentum fades.
The Reserve Bank of Australia (RBA) is having a monetary policy meeting this week and will deliver its decision on Tuesday. Market participants expect the Board to deliver a 25 basis points (bps) interest rate hike, the third consecutive one. If markets are right, the Official Cash Rate (OCR) will then reach 4.35% from the current 4.1%.
As usual, policymakers will release a statement that should shed some light on the discussion that led to the decision. Governor Michele Bullock will then hold a press conference, in which she could provide additional information about officials’ assessment of the current macroeconomic situation and their perspectives for the upcoming months.
Ahead of the announcement, the Australian Dollar (AUD) trades with a soft tone amid escalating concerns about the Iran war, pushing investors into safer assets.
RBA rate hike is a done deal amid energy-driven inflation risks
The Middle East war remains the main market driver. In fact, the RBA’s expected decision has plenty to do with the war. True, the first 2026 rate hike was driven by stubborn inflation and a tight labor market. Policymakers anticipated back then that inflation would be above target “for some time.”
What RBA officials could not anticipate was that inflation would jump to 4.6% YoY in March, its highest in over two years, due to soaring Oil prices resulting from the war in Iran.
The RBA has little else to do to address higher price pressures, yet the hike won’t solve the problem. At the same time, it will create an issue for the millions of Australian households facing increased mortgage costs, a long-standing, unresolved issue in the local economy. That’s a double whammy for households that already deal with skyrocketing gas prices.
The RBA can hike rates at every single meeting in 2026, but it won’t solve the underlying problem. Still, it will create a bigger one that may have a wider impact on the local economy.
At the end of the day, the February hike was about local inflation. The next and the upcoming ones are solely a result of the Iran war. That means that, as long as the conflict continues, there is no light at the end of the tunnel.
Commerzbank strategists note that the Overnight Index Swap (OIS) market is pricing in a 74% chance of a third consecutive 25bp hike, and a total of 64bp by year-end. “The main reason is due to elevated inflation, which is expected to stay above the 2-3% target band, driven by higher fuel costs and resilient domestic demand.”
Still, accompanied by a hawkish upgrade to the accompanying statement, the Aussie is likely to find near-term support and rise And the accompanying statement should reflect mounting Board concerns about the long-term effects of the Iran war. Back in March, officials noted that most members feared that inflation expectations could become unanchored without prompt action and agreed that further tightening would likely be needed.
How will the Reserve Bank of Australia’s decision impact AUD/USD?
A rate hike has already been priced in, which means it should have a limited impact on the AUD. However, if the rate hike is accompanied by a hawkish upgrade to the accompanying statement, the Aussie is likely to find near-term support and rise. A dovish tone should put pressure on the AUD, but it is unlikely.
Valeria Bednarik, Chief Analyst at FXStreet, notes: “The AUD/USD pair trades around 0.7180, easing from last week’s peak at 0.7227, its highest since June 2022. The US Dollar (USD) is temporarily benefiting from fresh concerns about a new Middle East war, although back–and–forth headlines keep major pairs within familiar levels. The near-term picture hints at fading bullish potential, but the case for a steeper decline seems limited, with slides towards the 20-day Simple Moving Average (SMA), currently at around 0.7130, attracting buyers. A slide through it could open the door for another leg south towards 0.7090, where the next round of buyers await.”
Bednarik adds: “A hawkish RBA outcome could push the AUD/USD pair towards the mentioned multi-year high, with gains beyond it exposing the 0.7270 price zone. Additional gains are unlikely solely on the RBA’s decision, but more likely linked to war-related headlines.”
