In brief
The Reserve Bank of Australia (RBA) increased the cash rate to 4.85% in a 6‑3 vote, the highest in 18 years. The move aims to curb inflation that remains above the target range, driven partly by higher fuel and commodity prices linked to the Middle‑East conflict. The RBA will meet again in December to review the rate.
The Reserve Bank of Australia (RBA) announced on Tuesday that it had raised its cash rate to 4.85%, the highest level it has seen since 2008. The increase of 0.25 percentage points was the fifth rise for the central bank in 2026.
Prior to this change the RBA’s cash rate stood at 4.60%. The new rate puts the cash rate target at 4.85% after a series of 0.25‑point hikes earlier in the year— in February, March, May and September.
Official statistics released on Oct. 28 showed that Australia’s annual inflation rose from 4.0 % in August to 4.3 % in September. Trimmed‑mean inflation, a key measure used by the RBA, increased from a revised 3.5 % to 3.6 %.
The RBA’s goal is to keep inflation between 2 % and 3 %. The board said that it expects inflation to stay above the target range for most of 2027, and that the top of the range will not be reached until late next year.
One factor driving the decision is the rise in fuel and commodity prices, which the RBA links to the ongoing conflict in the Middle East. Higher energy costs are spreading to other goods and services, the board said.
At the two‑day policy meeting, the majority of the board voted in favor of the hike. Six members supported the increase, while three members voted to leave the rate unchanged at 4.60 %.
The RBA said it will hold its final meeting of 2026 in early December to decide whether to adjust the cash rate further.
Major Australian banks, including the four that the RBA’s staff uses for forecasts, had all expected the rate hike following the latest inflation data.
The move is expected to make borrowing more expensive for households and businesses. Higher rates can slow spending and help bring inflation back toward the RBA’s target.
The decision reflects the central bank’s effort to protect the economy from the uncertain impact of global energy price pressures and to keep inflation under control as the year ends.
