RBA hikes benchmark rate to 18-year high of 4.85% as inflation risks persist
Katharina13
The Reserve Bank of Australia (RBA) raised its cash rate target by 25 basis points to 4.85% in a 6-3 majority decision, with three members voting to hold rates steady.
The hike matched market expectations, marking the fifth increase this year and pushing borrowing costs to their highest level since late 2008.
The decision reflects broad-based inflationary pressures driven by elevated energy and commodity prices amid Middle East tensions, domestic capacity constraints, and surging AI-related technology demand. With firms actively passing on cost increases, inflation is projected to remain above 3% over the coming year before cooling to the top of the 2–3% target range by late 2027.
The central bank noted that economic growth is expected to slow further, housing prices have fallen significantly, and unemployment is projected to rise more than previously anticipated..
The benchmark S&P/ASX 200 rose 0.2% to 8,870 in early Tuesday trading. Conversely, the Australian dollar fell below $0.70 to a two-week low.
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