Reserve Bank of Australia raises interest rates to 4.6%: Four hikes this year, further increases not ruled out

Zhitong Finance APP reports that the Reserve Bank of Australia raised its policy interest rate to 4.6% on Tuesday, reaching the highest level in 15 years, as the country seeks to curb inflation triggered by the Middle East conflict. The 25 basis point increase in the cash rate was in line with economists' expectations surveyed.

The RBA has raised rates four times so far this year, with a cumulative increase of 100 basis points, due to persistent inflation.

In a statement, the RBA said that some of the upside risks highlighted at its August meeting are now materializing.

The central bank wrote, “The Middle East conflict has escalated, and global energy prices are now much higher than previously assumed,” adding that demand related to artificial intelligence is driving technology goods prices up rapidly.

The RBA also stated it will "continue to take measures it considers necessary” to stem inflation, including further raising the policy interest rate.

Following the policy announcement, the S&P/ASX 200 index and the Australian dollar both remained largely unchanged.

Since 2026, Australia's inflation rate has stayed above its 2%-3% target range, touching a high of 4.6% in March. The country's latest published inflation rate was 3.5% in July, exceeding expectations. August data will be released on Wednesday.

A report from Bank of America last week stated that inflation is accelerating rather than converging towards the target level. “July's CPI is the clearest evidence of this shift and continues the recent trend of rising core inflation.”

Bank of America also noted that there is evidence energy costs are causing secondary effects, further reinforcing the risk that inflation is becoming entrenched.

“The Middle East conflict remains unresolved, and there is a scenario where inflation is above forecast and economic activity is below forecast,” the RBA wrote.

The central bank had previously warned that as interest rates rise, the country's economic growth will slow. Australia's economy grew 2.1% in the second quarter, down from 2.5% in the first three months of the year.