Decision comes in shadow of rising inflation, global stability
The Reserve Bank of Australia (RBA) has met market expectations by increasing the cash rate by 25 basis points, bringing it up to 4.35% for the first time since early 2025.
In delivering the decision, the RBA said: "As expected, developments in the Middle East are having an impact on inflation. Higher fuel prices are adding to inflation and there are indications that this is likely to have second-round effects on prices for goods and services more broadly. This inflation impulse is in addition to the high inflation recorded around the start of 2026, reflecting capacity pressures in the economy."
The Monetary Policy Board expects inflation to remain above target "for some time", but will "be attentive to the data and the evolving assessment of the outlook and risks" when making future decisions.
With the conflict in the Middle East continuing, the Board anticipates further upward pressure on global energy prices, causing a spike in near-term and longer-term inflation.
"But higher prices and prolonged uncertainty may cause growth to be lower in Australia’s major trading partners and also in Australia," added the Board.
Today’s policy decision was made by majority: eight members voted to increase the cash rate, while one member voted to leave it unchanged at 4.1%.
Attention now turns to the big banks, as borrowers brace for the latest rate hike to flow through to variable-rate mortgages.
The Big Four – Commonwealth Bank, ANZ, NAB and Westpac – have already moved quickly this year to reprice their home loans, passing on higher borrowing costs after the RBA’s two earlier rate rises in 2026.
More to come.
