Reserve Bank of Australia Raises Cash Rate to 4.10%
The Reserve Bank of Australia (RBA) announced today, Tuesday, that its Monetary Policy Board has decided to increase the official cash rate by 25 basis points, bringing it to 4.10%.
According to the RBA statement, the decision was passed with a majority of 5 members voting in favor of the increase, while 4 members voted to keep the rate unchanged at 3.85%.
The statement highlighted that, although inflation has declined significantly from its peak in 2022, it surged notably during the second half of 2025. Information from the previous Monetary Policy Board meeting indicated that part of this increase reflects rising pressures on productive capacity.
Additionally, the ongoing conflict in the Middle East has led to sharp increases in fuel prices, which could further accelerate inflation if the trend continues. Short-term inflation expectations have already risen as a result. The Board noted that there is a significant risk of inflation remaining above the target for longer than anticipated.
The RBA also observed that private demand grew substantially above expectations in mid-2025, although the composition of this growth was somewhat surprising in the fourth quarter. Business investment exceeded forecasts, whereas consumption fell short of expectations. Meanwhile, unit labor costs growth slowed.
At the same time, the unemployment rate remained slightly below expectations, and indicators of underutilized labor continued to be low. The housing market experienced strong activity and price growth over the past year, although the pace of housing price increases slowed somewhat at the beginning of 2026.
The statement concluded that the Board will closely monitor evolving data, forecasts, and risks to guide its policy decisions. Particular attention will be given to developments in the global economy and financial markets, trends in domestic demand, inflation expectations, and labor market conditions.
