Australia raises its cash rate to 4.85% in a split decision
Six board members back another quarter-point increase as the RBA pushes back its expected return to target inflation.
The Reserve Bank of Australia raised its cash rate target by 25 basis points to 4.85% on Tuesday. Six members of its Monetary Policy Board supported the increase; three preferred to leave the rate at 4.60%.
The central bank said inflation remains broadly based and that its updated forecasts do not show inflation reaching the top of its 2% to 3% target range until late 2027, about three quarters later than previously expected.
The RBA pointed to higher fuel and commodity prices linked to the Middle East conflict, domestic capacity pressures and rapid price increases for technology-related goods associated with AI investment. These were the bank's stated reasons for tightening, not a declaration that every part of the economy is strengthening.
A harder trade-off
The bank also said the economy is slowing, housing prices have fallen significantly and unemployment has risen. Its forecasts point to slower output growth and a larger rise in unemployment than it expected in August.
That leaves policymakers balancing persistent inflation against weakening demand. The board said future decisions would depend on incoming data and the evolving outlook; it did not commit to another rate increase or announce that the tightening cycle was over.
