RBA hikes its Cash Rate by 25bps as expected to 4.35%; via 8-1 vote (one voted to maintain rate at 4.10%); says inflation likely to remain above the target and risks remain tilted to the upside

DECISION

• Board assessed that inflation is likely to remain above target for some time and that the risks remain tilted to the upside, including to inflation expectations. It was therefore judged appropriate to increase the cash rate target.
• The Board will be attentive to the data and the evolving assessment of the outlook and risks to guide its decisions.
• Having raised the cash rate three times, monetary policy is well placed to respond to developments.
• It will do what it considers necessary to achieve that outcome.

INFLATION

• Inflation picked up materially in the second half of 2025, and information since the beginning of this year confirms that some of this increase reflected greater capacity pressures.
• There are early signs that many firms experiencing cost pressures are looking to increase prices of their goods and services.
• Short-term measures of inflation expectations have also risen.
• There are plausible scenarios where inflation is higher and activity lower than envisaged under the baseline forecast.

MIDDLE EAST

• A longer or more severe conflict could put further upward pressure on global energy prices; this would push up near-term inflation and could also increase inflation further out as these costs are passed through and if price rises get built into longer term inflation expectations.