RBA Hikes Key Rate to 15-Year High

2026-09-29 04:35 By Kyrie Dichosa 1 min. read

The Reserve Bank of Australia raised its cash rate target by 25 bps to 4.60% in a unanimous September 2026 decision, in line with expectations, marking its fourth hike this year and taking borrowing costs to their highest since 2011.

Policymakers noted that higher global energy prices following oil supply disruptions amid the broader Middle East conflict, stronger-than-expected recent inflation and persistent domestic capacity constraints are adding to inflation.

AI-related demand is also driving increases in global technology goods prices, while firms report rising costs and plans to pass costs on.

At the same time, output growth slowed but was slightly stronger than expected in Q2, while consumer spending is easing.

Housing prices fell in most capital cities and new housing loans declined, while labour market conditions have now also eased.

The Board said further tightening may be needed to prevent inflation from becoming embedded and return it sustainably to target.



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RBA Hikes Key Rate to 15-Year High
The Reserve Bank of Australia raised its cash rate target by 25 bps to 4.60% in a unanimous September 2026 decision, in line with expectations, marking its fourth hike this year and taking borrowing costs to their highest since 2011. Policymakers noted that higher global energy prices following oil supply disruptions amid the broader Middle East conflict, stronger-than-expected recent inflation and persistent domestic capacity constraints are adding to inflation. AI-related demand is also driving increases in global technology goods prices, while firms report rising costs and plans to pass costs on. At the same time, output growth slowed but was slightly stronger than expected in Q2, while consumer spending is easing. Housing prices fell in most capital cities and new housing loans declined, while labour market conditions have now also eased. The Board said further tightening may be needed to prevent inflation from becoming embedded and return it sustainably to target.
2026-09-29
Ample-Reserves Transition Still Underway: RBA Jacobs
The Reserve Bank of Australia said its shift toward an ample-reserves framework remains incomplete, with no fixed timeline for reaching equilibrium. Head of Domestic Markets David Jacobs noted in a speech that market behaviour will indicate when reserves reflect banks’ underlying demand rather than pandemic-era asset holdings. He cautioned that demand could move either way, underscoring the need for flexibility. Under the new system, the RBA will not target a specific reserve level but instead supply liquidity as required to keep the cash rate near the board’s target. Full-allotment open market operations will anchor this approach, with other tools available if repo markets falter. The central bank also confirmed that open repo is no longer necessary, as it was designed for a scarce-reserves regime. Market participants must manage liquidity more actively, drawing on both RBA facilities and private money markets to adapt to the evolving framework.
2026-08-25
RBA Flags Inflation Risks Despite Policy Hold: August Meeting Minutes
Australia’s inflation has eased from its March peak, with underlying price growth slightly lower than in late 2025, the Reserve Bank's August minutes showed. However, board members judged inflation “too high” and excess demand persistent. Meanwhile, financial conditions were seen as somewhat restrictive after earlier hikes. Staff projected inflation would only gradually return to target by late 2027, with risks skewed upward. Arguments for a 25-bp hike cited upside risks: Middle East conflict driving oil prices, firms passing costs more fully, stronger AI/data-center investment, resilient demand, and weak productivity. The case for holding steady rested on signs policy was already restrictive, inflation slightly below forecast, and unemployment rising. Downside risks included faster labor easing, weaker demand, and housing drag. Ultimately, policymakers left rates unchanged but reaffirmed readiness to act if upside risks materialise.
2026-08-25