economy
Australia central bank hikes rates to a near 1-year high as Iran war raises inflation risks
The 25 basis points hike was in line with expectations from analysts polled by Reuters
TL;DR
- The Reserve Bank of Australia (RBA) raised benchmark policy rates by 25 basis points to 4.1%, the highest level since April 2025.
- The hike was largely anticipated by analysts and aims to combat sticky inflation that remains above the RBA's target range.
- The RBA noted that while inflation has fallen from its 2022 peak, it increased significantly in the latter half of 2025.
- The ongoing war in the Middle East is expected to contribute to further global and domestic inflation.
- Domestic factors such as a positive output gap, high inflation, and a tight labor market were highlighted as key reasons for the rate increase.
- The decision to hike rates was passed by a narrow majority of the RBA board.
- Inflation is projected to stay above the 2%-3% target for some time, with risks tilted to the upside.