At its meeting today, the Board decided to increase the cash rate target by 25\u00a0basis points to
\n\t\t\t\t\t\t\t\t4.35\u00a0per\u00a0cent.<\/p>\n
Inflation picked up materially in the second half of 2025, and information since the beginning of
\n\t\t\t\t\t\t\t\tthis year confirms that some of this increase reflected greater capacity pressures. In addition, the
\n\t\t\t\t\t\t\t\tconflict in the Middle East has resulted in sharply higher fuel and related commodity prices, which
\n\t\t\t\t\t\t\t\tare already adding to inflation. There are early signs that many firms experiencing cost pressures
\n\t\t\t\t\t\t\t\tare looking to increase prices of their goods and services. Short-term measures of inflation
\n\t\t\t\t\t\t\t\texpectations have also risen.<\/p>\n
The Bank has updated its forecasts to incorporate recent data and developments in the Middle East.
\n\t\t\t\t\t\t\t\tThe baseline forecast, which assumes that the conflict is resolved soon and fuel prices decline, sees
\n\t\t\t\t\t\t\t\tunderlying inflation peaking higher than was expected in February. It then declines as demand growth
\n\t\t\t\t\t\t\t\tslows and capacity pressures ease in response to higher interest rates.<\/p>\n
Financial conditions have tightened this year. Money market interest rates and government bond yields
\n\t\t\t\t\t\t\t\thave risen, and the exchange rate has appreciated. But credit is readily available to both households
\n\t\t\t\t\t\t\t\tand businesses.<\/p>\n
There are materially heightened uncertainties about the outlook for domestic economic activity and
\n\t\t\t\t\t\t\t\tinflation. With the conflict in the Middle East continuing, there are plausible scenarios where
\n\t\t\t\t\t\t\t\tinflation is higher and activity lower than envisaged under the baseline forecast. A longer or more
\n\t\t\t\t\t\t\t\tsevere conflict could put further upward pressure on global energy prices; this would push up
\n\t\t\t\t\t\t\t\tnear-term inflation and could also increase inflation further out as these costs are passed through
\n\t\t\t\t\t\t\t\tand if price rises get built into longer term inflation expectations. But higher prices and prolonged
\n\t\t\t\t\t\t\t\tuncertainty may cause growth to be lower in Australia\u0092s major trading partners and also in
\n\t\t\t\t\t\t\t\tAustralia.<\/p>\n
\t\t\t\t\t\t\tDecision<\/p>\n
As expected, developments in the Middle East are having an impact on inflation. Higher fuel prices
\n\t\t\t\t\t\t\t\tare adding to inflation and there are indications that this is likely to have second-round effects on
\n\t\t\t\t\t\t\t\tprices for goods and services more broadly. This inflation impulse is in addition to the high
\n\t\t\t\t\t\t\t\tinflation recorded around the start of 2026, reflecting capacity pressures in the economy.<\/p>\n
In light of these considerations, the Board assessed that inflation is likely to remain above target
\n\t\t\t\t\t\t\t\tfor some time and that the risks remain tilted to the upside, including to inflation expectations. It
\n\t\t\t\t\t\t\t\twas therefore judged appropriate to increase the cash rate target.<\/p>\n
The Board will be attentive to the data and the evolving assessment of the outlook and risks to guide
\n\t\t\t\t\t\t\t\tits decisions. In doing so, it will pay close attention to developments in the global economy and
\n\t\t\t\t\t\t\t\tfinancial markets, trends in domestic demand and the outlook for inflation and the labour market.
\n\t\t\t\t\t\t\t\tHaving raised the cash rate three times, monetary policy is well placed to respond to developments
\n\t\t\t\t\t\t\t\tand the Board is focused on its mandate to deliver price stability and full employment. It will do
\n\t\t\t\t\t\t\t\twhat it considers necessary to achieve that outcome.<\/p>\n
Today\u0092s policy decision was made by majority: eight members voted to increase the cash rate
\n\t\t\t\t\t\t\t\ttarget by 25\u00a0basis points to 4.35\u00a0per\u00a0cent; one member voted to leave the cash rate
\n\t\t\t\t\t\t\t\ttarget unchanged at 4.10\u00a0per\u00a0cent.<\/p>\n","protected":false},"excerpt":{"rendered":"At its meeting today, the Board decided to increase the cash rate target by 25\u00a0basis points to
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