Australia’s Reserve Bank raised its cash rate by 0.25 percentage points to 4.85% on Tuesday, November 3, saying inflation was still high and its outlook had worsened.
The rate is now at its highest level since 2008. It was the fifth increase this year. The Monetary Policy Board was divided.
Six members supported the increase. Three preferred to keep the rate at 4.60%. Australia’s annual inflation rate for consumer prices reached 4.3% in September, up from 4.0% in August.
This added to concerns that price increases were proving difficult to stop. The RBA said inflation was affecting many areas. It raised its forecasts significantly, citing factors including higher fuel and commodity prices.
It now expects inflation to stay high through much of 2027. The return to its 2%–3% target range is now expected only in late 2027. Higher rates can make borrowing more expensive for households and businesses.
The effect on borrowers will depend on how lenders respond. The decision leaves policymakers considering the risk of persistent inflation and the effect of tighter monetary policy on economic activity.