Australia raised its benchmark rate to 4.60%, the highest since 2011.
Why it matters: The increase will raise borrowing costs for Australian households and businesses and add pressure to housing and spending. It also signals that the Reserve Bank of Australia remains concerned about inflation risks despite steady underlying inflation.
- The RBA raised its cash-rate target 25 basis points to 4.60% on September 29, 2026.
- The fourth rate increase of 2026 brought total tightening since the start of the year to 100 basis points.
- Headline inflation rose to 4.0% in August from 3.5% in July, while trimmed-mean inflation held at 3.6%.
- Governor Michele Bullock said recession was not the RBA's central case, but the bank left another increase possible.
The Reserve Bank of Australia raised its cash-rate target by 25 basis points to 4.60% at its September 29, 2026 meeting. The RBA's historical cash-rate series shows the rate is at its highest level since 2011.
It was the RBA's fourth increase of 2026, lifting the cash rate by 100 basis points since the start of the year, from 3.60% to 4.60%.
The decision followed a rise in headline inflation. Australia's Consumer Price Index increased 4.0% in the year to August, up from 3.5% in July. But trimmed-mean inflation, the RBA's preferred measure of underlying price pressure, was unchanged at 3.6% for a third consecutive month, according to the Australian Bureau of Statistics' August CPI release.
Housing was the largest contributor to annual inflation, with costs rising 5.7% and new-dwelling prices increasing 5.4%. Automotive fuel prices rose 14.8% in August from the prior month, reflecting higher world oil prices and the unwinding of remaining federal fuel-excise relief, the ABS reported.
The RBA said risks identified in August were materialising. It cited the broader Middle East conflict, higher global energy prices, and domestic capacity pressures - meaning demand was running strongly relative to the economy's ability to supply goods and services. It also pointed to elevated short-term inflation expectations and stronger demand for technology goods linked to artificial-intelligence investment.
Governor Michele Bullock said, "Our central case at this moment is not a recession." The RBA said housing prices had fallen in most capital cities and new housing loans had declined noticeably. Bullock also said financial conditions were restrictive, meaning borrowing costs were weighing on spending and demand.
The bank did not rule out another increase. Future decisions will depend on whether borrowing conditions are tight enough to return inflation to the 2%-3% target range. The next scheduled policy decision is in November.
By the numbers
- 4.60% - new RBA cash-rate target, the highest since 2011
- 4.0% - annual headline CPI inflation in August, up from 3.5% in July
- 100 basis points - total rate tightening since the start of 2026
Yes, but: The August CPI increase was driven partly by fuel and other volatile costs, while trimmed-mean inflation, the RBA's preferred underlying measure, was unchanged at 3.6%.
What's next: The RBA's next scheduled policy decision is in November 2026.