The Reserve Bank of Australia lifted its benchmark cash rate by 25 basis points to 4.85% on Tuesday, matching economist expectations and marking its fifth hike this year. Consumer price growth accelerated to 4.3% in September from 4% the prior month, prompting policymakers to warn that upside risks are actively materializing. Annual gross domestic product growth slowed to 2.1% in the June 2026 quarter, down from 2.5% in the prior quarter. Despite the cooling economy and severe household cost-of-living constraints, the central bank signaled that further tightening remains on the table if inflation fails to abate.
Key points
Borrowing costs have climbed to their highest point since November 2008 following the cen…: Borrowing costs have climbed to their highest point since November 2008 following the central bank's fifth increase this year.
Central bank leadership warned that further monetary tightening remains possible to count…: Central bank leadership warned that further monetary tightening remains possible to counter domestic spending and conflict-driven oil prices.
Economic expansion continues to lose momentum across the country, though policymakers do…: Economic expansion continues to lose momentum across the country, though policymakers do not currently project a full recession.
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Australia's central bank raised its benchmark cash rate by 25 basis points to 4.85% on Tuesday, the highest level since November 2008.
The Reserve Bank of Australia's move was in line with expectations from economists polled by Reuters, and marked its fifth rate increase this year.
This also comes as the country continues to grapple with high inflation, with the consumer price index rising 4.3% in September, up from 4% in August and marking its highest level since March.
In its September decision, RBA governor Michelle Bullock said that inflation is "too high," driven by higher oil prices from the Iran War and stronger domestic spending.
"We're seeing signs that upside risks to inflation are materializing," she added, saying that additional hikes will come "if that's what's needed to get inflation down."
Growth has slowed in the first two quarters of 2026. Australia's GDP rose 2.1% in the June quarter compared to a year earlier, down from 2.5% in the March quarter.
The RBA is trying to bring inflation back under control while higher borrowing costs and cost-of-living pressures weigh…
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