The Reserve Bank of Australia’s Monetary Policy Board raised the cash-rate target by 25 bp to 4.35 percent at its 5 May meeting, judging that a recent acceleration in inflation—driven by tighter domestic capacity, sharply higher fuel and other commodity prices stemming from the Middle East conflict and a lift in short-term inflation expectations—will keep price increases above target for an extended period and that risks remain skewed to the upside. After cutting the policy rate by a cumulative 50 bp to 3.60 percent between May and August 2025 and holding it through year-end, the Board has now delivered three consecutive 25 bp hikes since February 2026. Financial conditions have already tightened this year as money-market rates and government bond yields climbed and the Australian dollar appreciated, although credit remains readily available to households and businesses. The Bank’s updated baseline sees underlying inflation peaking higher than envisaged in February before easing as demand slows, yet it warns that a protracted or deeper regional conflict could further boost energy costs, lift inflation and curb growth at home and in key trading partners. The Board will continue to monitor global developments, domestic demand trends, inflation and labour-market conditions and says policy is well positioned to respond as needed to achieve its price-stability and full-employment mandate.
Reserve Bank of Australia 2026-05-05
Reserve Bank of Australia raises cash-rate target 25 bp to 4.35 percent
Reserve Bank of Australia raised the cash-rate target by 25bp to 4.35% at its 5 May meeting, the third straight hike, citing accelerated inflation driven by domestic capacity strains, higher commodity prices linked to Middle East conflict and firmer short-term expectations. It now projects a higher inflation peak, flags further upside risk from any prolonged conflict and says policy remains poised to adjust to safeguard price stability and full employment.