Reserve Bank of Australia raises cash rate to 4.85% amid persistent inflation.
Australia’s central bank raised interest rates for the fifth time this year amid persistent inflationary pressures.
The Reserve Bank of Australia increased its cash rate target by 25 basis points to 4.85%, marking an 18-year peak in rates, adding pressure on mortgage holders.
The latest rate rise is partly due to higher fuel and commodity prices, influenced by the Middle East conflict, and tighter-than-expected domestic capacity pressures.
The hike followed a hotter-than-expected consumer price index in September, with annual inflation escalating to 4.3% from August’s 4%.
Inflation outlook
Inflation remains high and is forecasted to stay elevated until 2027, hitting the 2-3% target range later than anticipated, by late next year and possibly mid-2028.
The central bank stated further tightening is necessary to align inflation with targets, citing risks of entrenched high inflation expectations.
The hike was approved by a majority, with six policymakers in favour and three against, preferring to maintain the rate at 4.60%.
Governor Michele Bullock mentioned inflation is anticipated to persist into 2027, with current hikes impacting the economy over the next year.
ANZ suggested Australia may be near the peak of cash rates, not predicting further increases despite potential risks in December or February if inflation expectations rise.
Bullock indicated that the prospect of further rate hikes is less certain than earlier this year.
