Michele Bullock, governor of the Reserve Bank of Australia (RBA), attends a news conference at the bank’s head office in Sydney, Australia, on Tuesday, Dec. 9, 2025. Australia’s central bank kept its key interest rate unchanged for a third straight meeting in a widely expected decision, while reiterating that future moves will hinge on incoming economic data. Photographer: Brendon Thorne\/Bloomberg via Getty Images<\/p>\n
Bloomberg | Bloomberg | Getty Images<\/p>\n
Australia’s central bank on Tuesday raised its policy rate to 4.35%, matching its December 2024 peak, as inflation remains elevated.<\/p>\n
The move by the Reserve Bank of Australia was in line with expectations in a Reuters poll of economists and marked its third consecutive rate increase.<\/p>\n
Eight members of the board voted for the hike, while one voted to hold rates at 4.1%.<\/p>\n
In its statement, the RBA said inflation had picked up materially in the second half of 2025, with conflict in the Middle East pushing up fuel and commodity prices.<\/p>\n
“As expected, developments in the Middle East are having an impact on inflation. Higher fuel prices are adding to inflation and there are indications that this is likely to have second-round effects on prices for goods and services more broadly,” it added.<\/p>\n
The central bank said that inflation is likely to remain above its 2% to 3% target for some time and that the risks remain elevated.<\/p>\n
The RBA also appeared to signal<\/a> that more rate hikes were on the horizon, with its economic forecasts pencilling in a 4.7% policy rate in December 2026, 50 basis points higher than projected in early February.<\/p>\n Should the policy rate exceed 4.35%, it would be the highest since December 2011.<\/p>\n Inflation forecasts for the bank were also upgraded to 4.8% for the June quarter and 4% for the year ending 2026, up from the previous February forecast of 4.2% and 3.6%, respectively.<\/p>\n Economic growth for 2026 was revised down to 1.3% from 1.8%.<\/p>\n ANZ Bank said in a note after the meeting that the RBA’s tone was “more hawkish than we expected,” adding that there was no clear opening to a pause in June as it expected. <\/p>\n “That does not necessarily mean that another rate increase is a foregone conclusion but instead signals that the Board’s preference is to keep its options open,” the bank said. <\/p>\n Australia’s economy grew 2.6%<\/a> from a year earlier in the fourth quarter, its fastest pace in two years, beating expectations.<\/p>\n The decision follows recent inflation data<\/a>\u00a0showing price pressures remain persistent. Consumer prices rose 4.09% in the first quarter from a year earlier, the highest in more than two years.<\/p>\n In March, inflation climbed to 4.6%, the highest since Australia began publishing monthly consumer price index data in 2025.<\/p>\n The RBA had signaled at its March meeting that further rate increases were likely, though policymakers differed on timing.<\/p>\n “Developments in the Middle East remain highly uncertain, but under a wide range of possible scenarios could add to global and domestic inflation,” the RBA said\u00a0after its March meeting<\/a>.<\/p>\n The RBA will hike rates to 4.60% in the third quarter of this year, according to Abhijit Surya, Senior APAC Economist at Capital Economics. <\/p>\n “Given the potential for incoming inflation data to surprise to the upside of the RBA’s expectations, we think further policy tightening remains likely,” Surya added.<\/p>\n