RBA lifts cash rate to 4.60%, highest in 15 years, cites energy inflation

The Reserve Bank of Australia raised its cash rate target by 25 basis points to 4.60% on 29 September, the highest level since late 2011, the Bank said in its Monetary Policy Board statement.

Upside inflation risks materialising

The Board said inflation remains elevated and some upside risks flagged in August are materialising: the Middle East conflict has broadened, global energy prices are much higher than assumed in August forecasts, and AI-related demand is driving rapid growth in technology-related goods prices. Domestic capacity pressures persist, firms report cost pressures, and recent Australian inflation outcomes were stronger than expected at the previous meeting.

ABC News noted the decision lifts the cash rate from 4.35% and comes a day before September-quarter inflation data. The Board said growth and inflation in Australia have been higher than expected, with higher fuel prices partly passed through to other goods and services.

Door open to further tightening

“The Board will continue to do what it considers necessary to bring inflation sustainably back to target, including increasing the cash rate target further if needed,” the statement said. Today’s decision was unanimous. The Bank said three earlier cash-rate increases this year have tightened financial conditions and the economy appears to be slowing, but judged further tightening warranted so high inflation does not become embedded.