Australia’s central bank raised its cash rate to a 15-year high on Tuesday in its fourth hike of the year, saying some inflation risks have materialised and that it was prepared to hike further if needed. Wrapping up its September policy meeting, the Reserve Bank of Australia (RBA) board voted unanimously to lift rates by 25 basis points to 4.6%.
The central bank raised its cash rate by +25bps to 4.60% in Sep-26, marking the fourth rate hike this year and bringing the policy rate to its highest level in 15 years. The Reserve Bank of Australia (RBA) noted that inflation risks had materialised amid higher-than-expected inflation and renewed increases in global oil prices. The central bank also highlighted that recent economic data pointed to stronger-than-expected growth and inflation, while continued disruptions to global energy supplies may contribute to further upside pressure on prices.
Despite tighter monetary conditions, Australia’s economic activity remained relatively resilient. GDP growth stood at +2.1%yoy in 2QCY26, while household spending remained firm, growing by +6.8%yoy. Labour market conditions also continued to be supportive, with employment growth exceeding expectations in Aug-26, although the unemployment rate edged higher to 4.6% (Jul-26: 4.5%) as more people entered the labour force. The RBA nevertheless acknowledged that higher borrowing costs are expected to exert a moderating effect on domestic demand and economic activity going forward.
MBSB said it expects the RBA to maintain a tightening bias in the near term as inflation remains above its target range of +2.0-3.0%. Elevated energy prices, geopolitical uncertainties and resilient domestic demand could keep inflationary pressures elevated and increase the likelihood of further policy tightening if price pressures fail to ease.
