Australia’s central bank has raised its benchmark interest rate for the second consecutive meeting, bringing it to 4.10%, the highest level since April 2025, as policymakers continue to address persistent inflation. The move was widely expected and reflects ongoing concerns that price pressures remain above the target range.
In its statement, the Reserve Bank of Australia noted that inflation, while lower than its 2022 peak, accelerated again in the second half of 2025 and is likely to remain elevated for some time. Policymakers also pointed to global uncertainties as an additional factor that could sustain inflationary pressures.
The decision to raise rates was made by a narrow majority, highlighting differing views within the central bank. Governor Michele Bullock emphasized that inflation risks remain skewed to the upside, reinforcing the need for a cautious and proactive policy approach.
Strong domestic economic conditions also played a key role in the decision. Australia’s economy continues to show resilience, with solid GDP growth and a tight labor market supporting higher interest rates. Inflation stood at 3.6% in the December quarter, while monthly data for January came in at 3.8%, slightly above expectations.
The central bank expects inflation to gradually return to its target range of 2%–3% by late 2026 or 2027. Until then, policymakers are likely to maintain a restrictive stance to ensure that price stability is restored without undermining economic growth.
