MNI RBA Review-March 2026: Inflation Worries Still At The Fore

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EXECUTIVE SUMMARY: 

• As was generally expected, the RBA decided to hike rates 25bp to 4.1% but the difficult discussion was reflected in the 5 to 4 vote with the latter believing rates should be held. The split in the Board was not about the direction of rates but the timing of the next increase 
• The March rate hike decision was not made lightly but was in response to above target inflation and ongoing excess demand in Australia which could allow second-round effects from the exogenous shock to fuel prices from the Iran War.
• Pricing shows tightening across all meetings, with the probability of a 25bp hike rising from 72% for May to 160% by August and 211% by December 2026.
• The Board remains flexible but the split vote in March may mean that another hike is less likely in May, as the difference was about timing, but global developments and domestic inflation and activity data will be monitored very closely before the next decision on 5 May.