Reserve Bank of Australia raises cash rate to 4.6%, warns of further hikes

The Reserve Bank of Australia raised its cash rate by 25 basis points to 4.6% on Tuesday, its highest level since 2011, and said further increases remained possible if needed to contain inflation.

The widely expected decision was the central bank’s fourth rate increase this year, bringing the total rise in 2026 to 100 basis points. The RBA board voted unanimously for the move as higher global energy costs and demand associated with artificial intelligence investment added to price pressures.

The central bank said risks identified at its August meeting were materializing, citing the widening Middle East conflict and energy prices that were higher than previously assumed. Governor Michele Bullock said prolonged disruption could keep fuel, fertilizer and transport costs elevated, while the board expressed concern that businesses could pass rising costs to consumers.

Australian inflation has remained above the RBA’s 2% to 3% target range during 2026. The annual rate was 3.5% in July, and August inflation data was due Wednesday. Bullock said she was confident higher rates would bring inflation down, while acknowledging the effect on mortgage holders.

The RBA said the economy was slowing as expected and reiterated that it would raise rates again if necessary. Bullock also said additional increases might not be needed and that the bank wanted to avoid a sharp rise in unemployment. Analysts remained divided, with ANZ and UBS forecasting another increase as early as November, while AMP, Commonwealth Bank and NAB expected rates to remain on hold.