The Reserve Bank of Australia (RBA) increased its interest rate by 25 basis points to 4.6%, the highest level since 2011. The decision was supported by all nine board members, marking the fourth increase in 2026. Policymakers also stated that further tightening is possible if the inflation rate does not start to decrease. In its statement, the RBA noted that the conflict in the Middle East has led to a rise in global energy prices, which significantly exceed the levels assumed in its August forecasts. Additionally, the bank emphasized the impact of AI-related demand, which is driving up global prices for technological goods. “High fuel prices are partially passed on to the prices of other goods and services. This inflationary impulse adds to the pressure on the economy's capacity,”– the bank stated.
This year, fuel prices have significantly impacted overall inflation in Australia. According to the Australian Bureau of Statistics (ABS), overall inflation reached 4.6% in March after a sharp 32.8% increase in fuel prices in just one month, but then fell to 3.5% in July due to a reduction in fuel excise in April. However, core inflation, measured by the trimmed mean, rose from 3.3% in March to 3.6% in July and has remained at this level since May, which is significantly above the RBA's target range of 2%–3%. “The board will continue to do whatever is necessary to bring inflation back to a sustainable level, including further increases in the target rate if required,”– added the RBA.
This measure increases pressure on the economy, which is already showing signs of slowing down. While the gross domestic product (GDP) grew by 2.1% for the year ending in June, down from 2.5% in March, the unemployment rate in Australia rose to 4.6% in August. Traders have increased bets on further tightening, with November's hike probabilities now at 56%. Previously, the figures were around 50%. According to the ABS, inflation data for August will be released this Wednesday, and September data, including quarterly reports, will be published on October 28, ahead of the RBA meeting in November.
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