Australia’s central bank raised its cash-rate target by 25 basis points to 4.60% on 29 September, the highest level in 15 years. The Reserve Bank of Australia said the decision was unanimous. It takes effect on 30 September. The Board said inflation remained too high and further tightening could be used if needed.
This was the fourth increase of 2026, lifting the cash rate by a cumulative percentage point since January. Trimmed-mean inflation, the RBA’s preferred underlying measure, was 3.6% in July, above the RBA’s 2% to 3% target. The Board said recent inflation outcomes and economic growth had been stronger than expected at its previous meeting. It also noted that earlier rate rises were tightening financial conditions and slowing activity.
INFLATION RISKS STRENGTHENED
The RBA said higher global energy prices were feeding into Australian costs as conflict in the Middle East disrupted oil supply. It also pointed to rapid price growth for technology-related goods, pressure on domestic capacity and elevated short-term inflation expectations.
Output growth had slowed but was stronger than expected in the June quarter, while consumer spending was easing and housing prices had fallen in most capital cities. Labour-market conditions had softened broadly as anticipated, but business investment and debt were still growing strongly.
DATA WILL GUIDE FURTHER TIGHTENING
The Board said aggregate demand needed to remain subdued so that capacity pressure would ease and inflation could return to target. It retained an explicit option to raise the cash rate again, while stressing uncertainty around energy prices, productivity and the domestic growth outlook.
The Board said it would be attentive to the data and the evolving assessment of the outlook and risks to guide its decisions. The September meeting minutes are scheduled for 13 October, followed by the next cash-rate update on 3 November.