- Decision
- Raise
- Rate change
- 25 bps
- cash rate
- 4.6%
The Reserve Bank of Australia (RBA) unanimously raised the cash rate target by 25 basis points to 4.60% on 29 September, judging further tightening warranted because inflation remained too high and upside risks were materialising even as the economy appeared to be slowing. Over the past year, the RBA held the rate at 3.60% through December 2025, raised it by 25 basis points in February, March and May 2026 to 4.35%, and held it in June and August. Recent inflation outcomes were stronger than expected, short-term inflation expectations remained elevated and firms reported cost pressures and plans to raise prices. Output growth slowed but was marginally stronger than expected in the June quarter, while business investment and debt growth remained strong. The broadened Middle East conflict and oil supply disruptions are lifting energy prices, while artificial intelligence-related demand is driving rapid growth in technology-goods prices, although growth among Australia’s major trading partners has been stronger than expected. The RBA said aggregate demand growth must remain subdued for a period and signalled it would raise the cash rate further if needed, guided by incoming data and evolving risks.
Rate evolution
From July 2025 to September 2026, the Reserve Bank of Australia’s cash rate target rose by a net 75 basis points to 4.60%, after an August cut and a pause through December gave way to three consecutive hikes from February, two holds on 16 June and 11 August, and a further increase on 29 September 2026. That early easing and the ensuing hold reflected substantial disinflation, with underlying inflation near the midpoint of the 2–3% range, while private demand recovered only gradually and the Board weighed weak productivity, high unit labour costs, tight labour conditions and elevated global uncertainty. By late 2025, however, the Board said underlying inflation had picked up, private demand and housing were strengthening and financial conditions had eased, shifting its language from more balanced inflation risks to a more cautious assessment of persistence and upside risk.
In subsequent decisions, it judged that stronger-than-expected private demand, greater capacity pressures, a tight labour market and fuel price increases linked to the conflict in the Middle East were likely to keep inflation above target for some time, with higher inflation expectations and possible second-round effects tilting risks to the upside despite heightened uncertainty and the possibility of weaker activity. Holding the cash rate target at 4.35% in June, the Board said headline and underlying inflation were still too high and that the disruption to global oil supply was adding to inflation and passing through to other prices, but it also noted tighter financial conditions, signs consumer spending was slowing as expected, a shift in housing market momentum and a higher-than-expected unemployment rate in April, and judged it appropriate to assess the effects of earlier increases and the oil supply disruption while remaining prepared to raise the cash rate target further if required. In August, the Board again held the rate at 4.35%, judging monetary policy somewhat restrictive and the economy to be slowing as expected, but on 29 September it raised the cash rate target by 25 basis points to 4.60% as some upside risks materialised, with recent data showing stronger-than-expected growth and inflation, further oil supply disruptions lifting energy prices, higher fuel costs passing through to other prices and domestic capacity pressures persisting.