The Reserve Bank of Australia’s Monetary Policy Board raised the cash rate target by 25 basis points to 4.85% in a six-to-three vote, citing a materially higher inflation outlook and growing risks that elevated inflation expectations become embedded, following September’s 25-basis-point increase to 4.60%. Inflation remains broadly based, with domestic capacity pressures tighter than previously assessed and higher fuel costs passing through to other goods and services. Inflation is not expected to reach the top of the 2–3% target range until late 2027, around three quarters later than previously forecast. Earlier rate increases have tightened financial conditions, and output growth is projected to slow further over the coming year as higher interest rates and falling housing prices weigh on household consumption and dwelling investment. Unemployment is expected to rise more than projected in August, although near-term business investment is forecast to strengthen. Globally, Middle East-related oil supply disruptions continue to lift energy prices and inflation, while artificial intelligence-related investment has supported stronger-than-expected growth in Australia’s major trading partners. The Board said it would do what it considers necessary to return inflation sustainably to target, with decisions guided by incoming data and its evolving assessment of the outlook and risks.
Reserve Bank of Australia Raises Cash Rate Target by 25 Basis Points to 4.85%
The Reserve Bank of Australia’s Monetary Policy Board raised the cash rate target by 25 basis points to 4.85% in a six-to-three vote, citing a materially higher inflation outlook and risks of elevated inflation expectations becoming embedded. Inflation is not expected to reach the top of the 2–3% target range until late 2027, around three quarters later than previously forecast.