Reserve Bank of Australia Raises Cash Rate to 4.6%

The Reserve Bank of Australia raised the official cash rate by 25 basis points to 4.6% on September 29, 2026, marking a 15-year high. This represents the fourth increase this year, totaling 100 basis points since February, as the central bank attempts to steer inflation back to a 2.5% target. Governor Michele Bullock cited three primary risks driving the decision: the prolonged conflict in the Middle East increasing energy prices, the global AI investment boom, and lasting domestic capacity pressures.

The decision followed data from the Australian Bureau of Statistics showing that household spending remained flat in August. Despite this stagnation and a rise in unemployment to 4.6%, the bank determined that economic restrictions were insufficient because demand continues to outstrip supply. Bullock warned that the bank will raise interest rates again if needed, though she noted that this could be the final hike of the year if further risks do not materialize.

Critics, including Greg Jericho of the Australia Institute, argued the hike is unsupported by economic data and will inflict unnecessary pain on mortgage holders without addressing external supply shocks. Financial experts noted the move significantly reduces borrowing capacity for first-home buyers and may dampen the spring property market. Following the announcement, the Australian dollar fell below 0.7000 against the U.S. dollar, as markets interpreted the decision as not necessarily initiating a new tightening sequence.