The Reserve Bank of Australia (RBA) raised its official cash rate to 4.35%, marking the third increase this year and undoing all three rate cuts made in 2025. The move aims to combat inflation, which is expected to peak at near 5% over the next few months due to global conflicts and domestic economic pressures.
Key Takeaways
The Reserve Bank of Australia raised its official cash rate to 4.35%, marking its third increase this year. The move aims to combat inflation, which is expected to peak at near 5%. Governor Michele Bullock cited global conflicts and government spending as factors contributing to economic challenges.
- RBA raises interest rates by 0.25 percentage points to 4.35%
- Headline inflation forecasted to reach nearly 5% due to global conflicts
- Unemployment expected to remain steady around the low fours through year-end
- Governor Bullock criticizes government spending as a factor in persistent inflation
- Markets predict an 80% chance of another rate hike by August
RBA Governor Michele Bullock stated that headline inflation is now forecasted to reach nearly 5%, up from previous projections of 4.2%. She emphasized that surging oil prices, driven by the US-Israel war on Iran, have made Australians poorer with 'no way out.' The conflict has also boosted domestic fuel prices by a third, despite some offset from reduced excise duties.
Bullock criticized the Albanese government's spending as a major factor in persistent inflation. She noted that higher prices and lower growth are expected due to global conflicts, with economic growth forecasted at an 'anaemic' rate of 1.3% in 2026. The RBA expects unemployment to remain steady around the low fours through the end of this year.
Markets are wagering on an 80% probability that the RBA could hike rates again to 4.6% by August, according to Reuters. Bullock warned that inflation would worsen if governments' cost-of-living relief was not 'targeting where it’s most needed.' The board voted 8–1 in favor of the hike, a firmer consensus than March's narrow split.
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