RBA raises the cash rate to 4.60%, its fourth increase this year
Serguey Asael Shinder2 min readThe Reserve Bank of Australia's Monetary Policy Board raised the cash rate target by 25 basis points to 4.60% at its meeting on 29 September. It is the fourth increase this year: the statement says the three earlier rises had tightened financial conditions and that the economy appears to be slowing, but that inflation is still too high.
The Board said some of the upside risks it flagged in August are materialising. The conflict in the Middle East has broadened and global energy prices are much higher than assumed in the August forecasts; AI-related demand is driving rapid growth in global prices for technology goods; and there remains pressure on domestic capacity. Firms in the bank's liaison report cost pressures and are raising prices or planning to. Short-term inflation expectations remain elevated, and recent Australian inflation came in stronger than expected at the previous meeting. Higher fuel prices have partly passed through to other goods and services.
On activity, output growth has slowed but was slightly stronger than expected in the June quarter. Consumer spending growth is easing gradually, housing prices have fallen in most capital cities and new housing loans have declined noticeably, while labour market conditions have eased broadly as expected. Business investment and debt are growing strongly. Growth among Australia's major trading partners has been stronger than expected, as the boost from AI-related investment has outweighed the effects of the Middle East conflict.
The Board said it will continue to do what it considers necessary to return inflation sustainably to target, including raising the cash rate further if needed.
What it means
The statement ties the decision to data that surprised on the upside since August rather than to a new view of the economy, and it keeps the tightening bias explicit. Its own list of cooling signs, falling house prices, fewer new housing loans and slower spending, is the counterweight it will weigh at the next meeting.