Reserve Bank of Australia increases cash rate to 4.85%
Key points
- The Reserve Bank of Australia raised its cash rate target by 25 basis points to 4.85% in response to elevated inflation and tighter domestic capacity pressures.
- The central bank stated that inflation is now forecast to remain elevated through much of 2027 and will not return to the 2–3% target range until late 2027.
- Policymakers acted because recent data confirmed broad-based price pressures, higher fuel costs, and risks that rising inflation expectations could become embedded.
The Reserve Bank of Australia’s monetary policy board decided to increase the cash rate target by 25 basis points to 4.85% due to elevated and broadly based inflation.
This decision follows updated staff forecasts that revised the inflation outlook materially higher, with price pressures expected to stay above 3% for the coming year.
The central bank noted that higher fuel and commodity prices from the Middle East conflict and tighter domestic capacity are driving the persistent cost pressures.
Staff projections indicate that inflation is not expected to reach the top of the 2–3% target range until late 2027, which is around three quarters later than previously forecast.
Six board members voted to raise the rate, while three members voted to leave the cash rate target unchanged at 4.60%.
The central bank stated that higher interest rates and falling housing prices are slowing economic growth to help return inflation to its target.
Following the announcement, the Reserve Bank of Australia cash rate was up at 4.85%.
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