Under triple pressure, Australia will stand still this week, ending the continuous hike cycle that began in 2026.

Australia is expected to maintain its key interest rate for the first time this year. As signs of economic weakness emerge, the market's bets on further rate hikes are receding. Economists predict that the Reserve Bank of Australia (RBA) will keep the cash rate at 4.35%, ending a streak of three consecutive rate hikes in the first three meetings of 2026. The focus of the market is on whether Governor Michelle Bullock will express confidence in the current rate level or leave room for further rate hikes to deal with persistent price pressures. Bullock will hold a press conference at 3:30 pm Sydney time on Tuesday, an hour after the interest rate decision is announced. Australian households and the overall economy are facing pressure from three factors: rising inflation, rapid rate hikes by the RBA, and soaring fuel costs due to the Iran war. These factors are already showing in the data weak growth, rising unemployment, and slightly easing inflation pressures. Prashant Nundah, Chief Macro Strategist at TD Securities in Singapore, expressed concerns that investors may misinterpret any signals from Bullock about keeping the cash rate unchanged for an extended period as "dovish," which could pose risks. He is worried that investors may overinterpret such guidance. "We suspect that the RBAs model is signaling an imminent economic downturn, and given that trimmed mean inflation is expected to remain elevated for some time, any discussion of rate cuts is premature." As the interest rate decision in Australia is announced, several major central banks are also expected to hold rates steady this week. The market generally expects the Fed, the Bank of England, and the Swiss National Bank to keep rates unchanged, while the Bank of Japan's further policy tightening has been largely digested by the market. The European Central Bank raised rates for the first time in nearly three years last week. President Christine Lagarde warned that inflation caused by the Iran war is spreading beyond the energy sector. There has been a slight adjustment in Australia's rate outlook last week. Sally Auld at the Australia and New Zealand Banking Group withdrew her prediction of another rate hike by the RBA, citing increasing signs of economic momentum slowing down. Her view is also supported by overseas developments the signal of a potential end to the US-Iran war led to oil prices falling to a two-month low. The currency market has adjusted accordingly: at the beginning of last week, traders were fully pricing in another rate hike by the RBA before December, but by the end of last week, the probability had dropped to just 60%. Since the May meeting, Australia's unemployment rate unexpectedly rose to a four-and-a-half-year high, household spending declined, and economic growth was slightly weaker than expected. Meanwhile, although inflation remains above the upper end of the RBA's 2-3% target range, recent data indicate that the upward trend may not be as strong as previously feared. Earlier this month, Bullock stated at a parliamentary hearing that the central bank has seen signs that rate hikes are transmitting to the real economy, with the property market showing signs of slowing down. However, she expressed concerns about the risk of a second round of inflationary effects triggered by the energy shock from the Iran war. The RBA expects that economic growth will significantly slow down within its forecast range (until mid-2028), and overall inflation and core inflation will return to the midpoint of the 2.5% target. Nevertheless, some economists still believe that the tightening cycle is not over. Josh Williamson of Citigroup expects the RBA to pause rate hikes this month, but he believes that due to uncertainty about inflation prospects, this decision may have a "hawkish" tilt, and he continues to predict a 25-basis-point rate hike in August. He said, "Although recent data have provided room for a temporary pause, the upward spiral of domestic wages and prices, as well as the risk of a second round of inflationary effects from the Middle East conflict, suggest that current policy is not tight enough."