Reserve Bank of Australia Raises Cash Rate to 4.60%, Flags Inflation Risks

The Reserve Bank of Australia resumed tightening on Tuesday, raising its cash rate target by 25 basis points to 4.60% and signaling that inflation remains too high as some previously flagged risks begin to materialize. In its media release, the central bank said, “At its meeting today, the Board decided to increase the cash rate target by 25 basis points to 4.60 per cent.” It added: “Today’s policy decision was unanimous.”

The move matters because it marks a return to rate increases after an August pause and underscores the bank’s concern that inflation could stay above target for longer. The cash rate, the RBA’s main tool for influencing borrowing costs and demand in the economy, had been left unchanged at 4.35% on Aug. 11. Earlier this year, the RBA lifted the rate to 3.85% on Feb. 3, 4.10% on March 17 and 4.35% on May 5, making Tuesday’s decision the fourth increase of 2026. Higher official rates typically flow through over time to higher borrowing costs for households and businesses.

The RBA said inflation remains elevated and that some upside risks it had identified earlier are now emerging more clearly. It pointed to conflict in the Middle East, higher global energy prices, disruptions to global oil supply and higher fuel prices. It also cited AI-related demand that is driving rapid growth in global prices for technology-related goods. At home, the bank said domestic cost pressures and capacity pressures remain, with firms either raising prices or considering doing so. The board also said recent inflation outcomes in Australia were stronger than it had expected at its previous meeting.

The latest official data show inflation has eased from earlier levels but remains above the measures the RBA watches closely. The Australian Bureau of Statistics said headline consumer inflation was 3.5% in July from a year earlier, down from 3.8% in June. The trimmed mean measure, which strips out some volatile items and is closely watched by the RBA, was 3.6%, unchanged. The economy grew 0.4% in the June quarter, according to ABS data, while the unemployment rate was 4.6% in August.

The central bank said economic growth has slowed, though it was slightly stronger than expected in the June quarter. It also noted signs of softer conditions in housing, saying prices have fallen in most capital cities and new housing loans have declined noticeably.

Looking ahead, the RBA kept the door open to further action if inflation does not return to target sustainably. “The Board will continue to do what it considers necessary to bring inflation sustainably back to target,” the bank said, adding that it would remain attentive to incoming data and risks, including increasing the cash rate target further if needed.