RBA raises rate to highest since 2011, says it may hike further

The Reserve Bank of Australia raised its cash rate by 25 basis points to 4.6%, the highest level since 2011. Its nine-member board voted unanimously for the fourth increase of 2026. The bank said it could raise the rate further if needed to bring inflation sustainably back to target. The RBA said global energy prices were well above the levels assumed in its August forecasts. It also said AI-related demand was raising global prices for technology goods. The RBA said higher fuel prices had partly passed through to other goods and services. Australian Bureau of Statistics data showed headline inflation reached 4.6% in March after fuel prices rose 32.8% in one month. Headline inflation eased to 3.5% by July, helped by an April cut that halved the fuel excise. The trimmed mean measure of underlying inflation rose from 3.3% in March to 3.6% in July. It has remained at 3.6% since May, above the RBA's 2% to 3% target band. The US Federal Reserve raised its target range by 25 basis points to 3.75% to 4% on September 16, its first increase since 2023. The European Central Bank raised its deposit rate to 2.5% days earlier. The Bank of Japan raised its policy rate to 1.25% on September 18, the highest since 1995. The Bank of England held its rate at 3.75% on September 17. Three of its nine policymakers voted for an increase. Australia's GDP growth slowed to 2.1% in the year to the June quarter from 2.5% in the March quarter. The RBA noted that housing prices had fallen in most capital cities. Bloomberg reported that Australia's unemployment rate rose to 4.6% in August. Swaps priced a 56% chance of a November increase, up from about 50% before the decision. The Australian Bureau of Statistics is due to release August inflation data on Wednesday. It is due to publish September figures, including quarterly readings, on October 28, before the RBA's November meeting.