RBA raises cash rate to 4.60%, its fourth increase of 2026, as inflation risks build
The Reserve Bank of Australia raised its cash rate target by 25 basis points to 4.60% on 29 September, the fourth increase of 2026 and the highest setting since November 2011. The decision, announced at 2:30pm Sydney time, was unanimous among the nine members of the Monetary Policy Board, according to coverage from Commonwealth Bank's newsroom and Savings.com.au, and followed earlier moves in February, March and May that have added a full percentage point this year.
The board's statement was direct about its reasoning. "Since the previous meeting, some of the upside risks to inflation are materialising," it said, adding that recent data suggested growth and inflation in Australia had been higher than expected. It concluded that "a further tightening in financial conditions is warranted" and repeated that it would do what is necessary to return inflation to the 2–3% target, "including increasing the cash rate target further if needed".
The move had been widely anticipated. RTTNews described the increase as in line with expectations, and the preview from OrbitRemit noted that consumer inflation expectations had climbed to 4.9% in September while the underlying measure the bank follows most closely was forecast to hold near 3.6%, well above the top of the target band. Unemployment had risen to 4.6% in August, a loosening the board described as broadly as expected rather than a reason to pause.
Governor Michele Bullock framed the decision as a reluctant one. "The board did not take this decision lightly," she said at the post-meeting press conference, according to OrbitRemit's account, adding that the full effect of rate rises "can take 12–18 months" to be felt and that inflation is being driven by domestic capacity pressures rather than imported costs alone.
The Australian dollar softened on the announcement, with AUD/USD slipping to around 0.7018, the preview service reported, as traders judged Bullock's tone more cautious than the hike itself implied. Standard Chartered, cited via FXStreet, characterised the governor's remarks as carrying "a more dovish slant" than the statement.
Australia's tightening cycle now sits apart from much of the developed world. The US Federal Reserve raised rates by a quarter point in September for the first time in three years, while the IMF's October World Economic Outlook urged central banks generally to keep policy restrictive enough to prevent second-round effects from the energy shock. The RBA's four moves this year make it one of the more aggressive among its peers.
Commonwealth Bank's economists still see risks tilted towards further increases but expect the economy to slow enough for cuts to begin late next year, with August and November 2027 pencilled in, senior economist Ashwin Clarke said. Among other forecasters canvassed by OrbitRemit, CBA, Westpac and Standard Chartered expect a hold in November, while ANZ forecasts a further rise to 4.85%.
The decisive input will be the September-quarter consumer price index, due from the Australian Bureau of Statistics on 28 October. The board next meets on 2 and 3 November, with the decision scheduled for 2:30pm on Melbourne Cup Day.
