Australia Rises Key Interest Rate
The Reserve Bank of Australia (RBA) announced Tuesday that its Monetary Policy Board reached a unanimous decision during its inaugural 2026 session to elevate the cash rate target to 3.85 percent from 3.60 percent.
The move represents a policy reversal for the central bank, which had reduced rates by 0.25 percentage points on three separate occasions throughout 2025. The last rate elevation occurred in November 2023.
Tuesday's statement from the Monetary Policy Board acknowledged that price growth has declined significantly from 2022 peaks, yet emphasized a substantial acceleration during the latter six months of 2025.
Recent figures from the Australian Bureau of Statistics (ABS) reveal the consumer price index climbed 3.8 percent over the twelve months ending December 2025, marking an uptick from November's 3.4 percent reading.
The RBA's preferred underlying inflation gauge—the trimmed mean—advanced 3.3 percent year-over-year through December, compared to 3.2 percent through November.
Policymakers now project inflation will stay elevated beyond the central bank's 2-3 percent target range for an extended period.
"It is evident that private demand is growing more quickly than expected, capacity pressures are greater than previously assessed and labor market conditions are a little tight," the board stated.
Revised economic projections released Tuesday show the RBA anticipating annual CPI growth reaching 4.2 percent by June 2026—a sharp increase from November's 3.7 percent forecast—before moderating to 2.9 percent by June 2027.
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