The Reserve Bank of Australia raised its cash rate target by 25 basis points to 4.60% on September 29, taking borrowing costs to their highest level in about 15 years as policymakers responded to renewed inflation pressure.
The central bank said inflation had remained elevated and that several upside risks identified in August were materialising. It pointed to higher global energy prices, stronger-than-expected recent inflation outcomes in Australia and continued pressure on domestic capacity.
RBA points to energy and technology costs
In its policy statement, the RBA said the conflict in the Middle East had broadened and pushed global energy prices well above the assumptions used in its August forecasts. It also cited rapid increases in technology-related goods prices linked to global demand associated with artificial intelligence.
Australian firms were reporting persistent cost pressures, the bank said, with some businesses already raising prices and others considering increases. Short-term inflation expectations also remained elevated.
Growth has slowed but not enough to ease inflation concerns
The RBA acknowledged that output growth had moderated and household spending was easing gradually. Housing prices had fallen in most capital cities and new housing lending had declined noticeably. Even so, economic growth in the June quarter was somewhat stronger than the central bank had expected.
The decision lifts the cash rate from 4.35% to 4.60%. The RBA’s published cash-rate schedule shows the new target taking effect on September 30. The move extends a tightening cycle that included rate increases in February, May and now September 2026.
For households and businesses, the higher benchmark rate is likely to keep pressure on mortgage costs, consumer credit and corporate borrowing. Markets will now focus on incoming inflation and employment data for clues about whether the RBA believes further tightening is required.
Sources: Reserve Bank of Australia monetary policy statement and cash-rate table; Reuters market coverage.
