The Reserve Bank dominated the local week, holding the cash rate as universally expected but with a deliberate hawkish tilt. Governor Bullock confirmed the Board discussed only holding or tightening (cuts were never on the table) and said she personally thought it "quite possible we might need to go higher, but we'll wait and see". Trimmed mean inflation, at 3.6% in the June quarter, is still not forecast back at the midpoint of the target band until the end of 2027, and she nominated four upside risks: limited spare capacity, a tight labour market, the Middle East conflict and the AI boom. Housing is softening faster than rates alone would imply, Q2 home loans fell just over 5% with investor loans down about 10%, but falling house prices are doing some of the RBA's work, not changing its inflation focus. Markets ended the week pricing a better-than-even chance of another hike this year, ten-year yields near 5% and the dollar just above 70.8 US cents, its highest since early June.

Nor is the tightening conversation only local. US July CPI printed exactly on expectations (core easing to 2.5% annually) and producer prices were flat, yet futures spent midweek pricing a roughly even chance of a September Fed hike, with Boston's Collins calling inflation too high and former Philadelphia president Harker arguing that five-plus years above target has become a credibility problem. Cost-of-living pressure is what keeps the debate live on both sides of the Pacific: household one-year inflation expectations sit at 4.3% in the Michigan survey, and July retail sales fell 0.6% against an expected rise as sentiment deteriorated. US data are now surprising to the downside just as Europe surprises to the upside, a challenge to US exceptionalism that is sapping the dollar. Chair Warsh's Jackson Hole speech on the 28th looms as the real signal.

The equity market's response is telling. The S&P 500 set another record with the VIX near 15, but the more interesting story is beneath the surface: the equal-weighted S&P 500 is up around 15% this year against 13% for the cap-weighted index, with financials, industrials and healthcare at record highs, driven by strong earnings momentum. A broadening  rally is a healthier rally. Australia is the mirror image: the top ten stocks now account for roughly 49% of the ASX 200, above the long-run average, which historically has been the point at which equal weighting begins to pay. Oil, meanwhile, ended the week almost 6% higher near US$88.5 on Brent as Hormuz hopes faded, only 14 vessels transited versus 130 pre-war. Even a US$500 billion consortium funding package for Nvidia drew only a 1.4% dip: this market is about the E, not the P/E.

The through-line is patience with discipline. A hawkish hold is not a tightening; that rate rises remain a live possibility precisely because cost-of-living pressures have not fully cleared; and that breadth — not just the index level — is worth watching. Thursday's Australian labour force data is the week's key local test.