Australia central bank raises rates to highest since 2024 as inflation stays elevated
Reserve Bank of Australia (RBA) governor Michele Bullock attends a press conference at the bank’s headquarters in Sydney, Australia, on Tuesday, December 9, 2025. In a widely anticipated decision, Australia’s central bank kept interest rates unchanged for a third meeting in a row and reiterated that future moves will depend on incoming economic data. Photographer: Brendon Thorne/Bloomberg via Getty Images
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Australia’s central bank on Tuesday raised its policy rate to 4.35%, its highest level since December 2024, amid high inflation.
The Reserve Bank of Australia’s move was in line with expectations in a Reuters survey of economists and marked the third consecutive rate hike.
Eight members of the RBA board voted to increase rates, while one member voted to keep rates at 4.1%.
The RBA said in its statement that inflation had picked up significantly in the second half of 2025, and that conflict in the Middle East had led to fuel and related commodity prices rising sharply, further boosting inflation.
“As expected, developments in the Middle East are having an impact on inflation. High fuel prices are increasing inflation, and there are indications that this may have second-round effects on prices of goods and services more broadly,” the report said.
The central bank said inflation was likely to remain above the 2% to 3% target for some time and risks remained high.
The Australian economy grew by 2.6% in the fourth quarter compared to the previous year, achieving the fastest growth in the last two years and exceeding expectations.
The decision comes after the latest inflation data showed price pressures continuing. Consumer prices increased by 4.09% in the first quarter compared to the previous year, reaching the highest level in more than two years.
Inflation rose to 4.6% in March, the highest level since Australia began publishing monthly consumer price index data in 2025.
At its meeting in March, the RBA signaled that further interest rate hikes were likely, although policymakers had different views on timing.
“Developments in the Middle East remain highly uncertain, but a wide range of possible scenarios could contribute to global and domestic inflation,” the RBA said. After the March meeting.
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