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. This unanimous decision by the nine-member policy committee marks the fourth increase this year and the highest rate since November 2011. The move aims to curb underlying inflation, which has averaged 3.5% over the last six months, exceeding the bank's 2% to 3% target range.

Governor Michele Bullock cited several drivers for the hike, including resilient domestic demand, escalating global energy prices caused by the broadening conflict in the Middle East, and rapid price increases for technology goods fueled by the AI boom. Bullock acknowledged that the decision would hit some households "pretty hard" but argued that failing to lower inflation would be worse for employment. She warned that if inflation expectations spiral, the bank might need to implement a "dramatic slowdown in the economy."

Political reactions were divided. Shadow Treasurer Tim Wilson attributed the hike to domestic government failures, while the government pointed to international pressures. Financial advocates warned of deepening mortgage stress, noting that the hike increases monthly repayments for average loans. Despite the rate increase, the Australian dollar fell below 0.7000 against the U.S. dollar, as markets reacted to signals that this may not initiate a new tightening sequence. The bank indicated that further increases remain a possibility, with the next update scheduled for November 3.