RBA raises the cash rate to 4.60%, highest since November 2011

The Reserve Bank of Australia raised its cash rate target by a quarter of a percentage point on Tuesday, to 4.60%, the highest setting since November 2011.

The new target takes effect on Wednesday. The cash rate is what banks charge one another for overnight loans, and mortgage rates follow it.

This is the fourth rise of 2026, and it takes the rate above the 4.35% peak of the last cycle, reached in November 2023. From 3.60% at the end of 2025, rises in February, March and May took the rate to 4.35%, and the board held there in June and August. The four moves have added 1 percentage point.

The rise matched what a Reuters poll of economists had expected. On Monday, interest-rate futures put the chance of a rise at 90%.

Other central banks raised rates this month too. The US Federal Reserve raised its target range to 3.75% to 4% on Wednesday, September 16, and on Thursday, September 24, Norway's Norges Bank announced a rise in its policy rate to 4.50%.

The board said inflation remains elevated, and that some risks it flagged in August are now showing up. The conflict in the Middle East has broadened, oil supply has been disrupted further, and global energy prices are much higher than the August forecasts assumed, it said. Australian inflation has come in stronger than the board expected at its last meeting, it said, and firms facing higher costs are raising prices, or looking to do so.

The latest official figures are for July. The Australian Bureau of Statistics said consumer prices rose 3.5% in the year to July, and the trimmed mean, a measure that sets aside the largest price rises and the largest price falls, was 3.6%. The bank's target is 2% to 3%.

Governor Michele Bullock told a parliamentary economics committee on Friday, September 18 that the August forecasts did not have inflation back around the middle of that range until late 2027.

Last Thursday, five days before the decision, the bureau said the unemployment rate rose to 4.6% in August, from 4.5% in July, even as employment increased by 39,500 people.

The board's account was milder. It said the job market has eased about as expected, and that spending is easing gradually. House prices have fallen in most capital cities and new housing loans have dropped noticeably, it said. Output growth has slowed, the board said, though the June quarter was a little stronger than it expected.

The board's answer was that demand still has to stay soft for a while if inflation is to come back to target.

"The Board will continue to do what it considers necessary to bring inflation sustainably back to target, including increasing the cash rate target further if needed," the board said.

Coming decisions will depend on the data and on how the risks evolve, it said. The vote was unanimous. The board meets again on Tuesday, November 3.

Abhijit Surya, senior Asia-Pacific economist at Capital Economics, wrote on Wednesday, September 23 that he expected this rise, and that unlike markets he doubted further tightening would be needed. Before the decision, markets were pricing another rise by next February.

At 3:30 p.m. Sydney time, the S&P/ASX 200 was at 8,669, down 0.1% on the day. The four big banks were down between 0.6% and 1.0% in afternoon trade.

BEWA, a fund that holds Australian shares, last traded on Monday at $28.50, before the decision. Those four banks are about 30% of the fund, so a holder is exposed overnight to the bank shares that were lower in Sydney.

August inflation figures are due on Wednesday morning in Sydney, a day after the board moved. That release is the first test of the decision.