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# Reserve Bank of Australia Raises Cash Rate 25 Basis Points to 4.35 Per Cent in May
- URL: https://www.theglobalbanker.com/reserve-bank-of-australia-raises-cash-rate-25-bp-4-35-percent-may-2026/
- Published: 2026-05-06T18:17:00.000Z
- Updated: 2026-10-24T01:39:51.000Z
- Description: The RBA lifted the cash rate target by 25 bp to 4.35% effective 6 May 2026, saying inflation was likely to remain above target for some time.
- Author: TGB Editorial Team
- Tags: Central Banks, Asia-Pacific

The Reserve Bank of Australia raised its cash rate target by 25 basis points to 4.35 per cent on Tuesday, saying inflation was likely to remain above target for some time and that risks remained tilted to the upside. The new rate takes effect from 6 May 2026.

The move is the Board's third increase this year, after hikes in February and March, and returns the cash rate to the 4.35 per cent peak of the previous tightening cycle. The RBA also flagged, in its baseline projections, that the cash rate is assumed to reach 4.7 per cent by the end of 2026.

#### BOARD CITES INFLATION FIGHT

The Board said inflation was likely to remain above target for some time and that risks remained tilted to the upside, including to inflation expectations, according to the accompanying policy statement. The decision was made by majority, with eight members voting for the increase and one voting to hold at 4.10 per cent. The Board said higher fuel prices were adding to inflation and that there were indications this was likely to have second-round effects on prices for goods and services more broadly.

The RBA's inflation target is 2-3 per cent. In the May Statement on Monetary Policy, the RBA forecast trimmed mean inflation to remain above 3 per cent until mid-2027 before easing to 2.5 per cent by early 2028, assuming the cash rate follows the market path.

#### BASELINE ASSUMES 4.7 PER CENT BY YEAR-END

The RBA's baseline projections, published alongside its May Statement on Monetary Policy, assume that the cash rate reaches 4.7 per cent by the end of 2026\. That would imply the possibility of further moves beyond the increase announced on Tuesday, subject to how the inflation outlook evolves.

The cash rate assumption in the SMP is derived from financial market pricing, which implied a cash rate 60 basis points higher by the end of 2026, and the RBA's forecasts are conditioned on that path.

The move to 4.35 per cent takes Australia's cash rate to the highest level of the current tightening cycle, which began with a hike in February 2026.