Australia central bank hikes rates to a near 1-year high as Iran war raises inflation risks
Reserve Bank of Australia (RBA) governor Michele Bullock speaks at a press conference in Sydney, Australia, on Tuesday, July 8, 2025.
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Australia’s central bank on Tuesday raised its benchmark policy interest rate for a second straight day, pushing it to 4.1%, its highest level since April 2025, amid sticky inflation.
The 25 basis point increase was in line with expectations of analysts polled by Reuters and came as Australian inflation remained above the central bank’s upper limit of 3% and war in the Middle East risks further rises in prices.
“While inflation has fallen significantly since the peak in 2022, it has recovered significantly in the second half of 2025,” the Reserve Bank of Australia said in a statement. he said.
The RBA also said developments in the Middle East remained highly uncertain but could contribute to global and domestic inflation. The bank said that inflation is likely to remain above the target for a while and risks are trending upwards, which requires an interest rate increase.
The raise resolution was accepted by a narrow majority, five in favor and four against.
The RBA’s views echo concerns raised by Lieutenant Governor Andrew Hauser. an interview “We have a problem with inflation. It’s too high,” he said last week.
Hauser said the RBA’s forecast is that inflation will only return to the 2-3 per cent target range by the end of 2026 or 2027, and to the midpoint of this target range in 2028.
Central Bank in February there was a prediction Headline inflation is projected to peak at 4.2% in mid-2026 and then fall to “just under 3%” in mid-2027.
Hauser said these forecasts could be revised upward because they preceded the oil shock caused by the Iran war.
Inflation in the country stood at 3.6% in the quarter ending in December. On a monthly basis, inflation was 3.8% in January, slightly above expectations of 3.7%.
Economic growth in the country remains strong; GDP in the fourth quarter exceeded expectations by 2.6%, allowing the central bank to keep interest rates high.
of Australia S&P/ASX200 After the decision, the index increased by 0.11%.
