Key points: This rate hike of 25 basis points matched the expectations of economists surveyed by Reuters. The Reserve Bank of Australia has now raised rates four times this year, for a cumulative increase of 100 basis points.
On Tuesday, December 9, 2025, Reserve Bank of Australia Governor Michele Bullock attended a press conference at the central bank's headquarters in Sydney.
With the Middle East conflict driving inflation higher, Australia's central bank raised its policy rate on Tuesday to 4.6%, the highest level in 15 years.
The cash rate increase of 25 basis points was in line with the expectations of economists polled by Reuters.
Because inflation has remained stubbornly high, the Reserve Bank of Australia has completed four rate hikes this year, totaling 100 basis points.
The Reserve Bank of Australia said in its monetary policy statement that some of the upside inflation risks flagged at the August meeting have now materialized.
The central bank wrote: "The Middle East conflict has further widened, and global energy prices are now far above the assumptions in previous forecasts." It also added that artificial intelligence-related demand is driving a rapid increase in the prices of technology goods.
The RBA also said that, in order to curb inflation, the central bank "will continue to do whatever is necessary," including further increases in the policy rate.
After the policy decision was announced, Australia's S&P 200 index and the Australian dollar were little changed.
In 2026, Australian inflation remained persistently above the 2%-3% target range, with inflation having spiked to 4.6% in March; the latest inflation reading in July came in at 3.5%, above market expectations.
August inflation data will be released on Wednesday.
Bank of America said in a research report last week that Australian inflation is accelerating rather than returning toward target.
"The July consumer price index is the clearest evidence of this shift, with core inflation showing a sustained upward trend in recent months."
Bank of America also said there are signs that energy costs are producing second-round pass-through effects, increasing the risk that inflation becomes entrenched.
The RBA said: "The Middle East conflict has not yet been resolved, and there are scenarios in which inflation is higher than forecast and economic activity is weaker than expected."
The central bank had previously warned that rate hikes would cause the domestic economy to slow.
Data from the Australian Bureau of Statistics show that the country's economy grew year-on-year in the second quarter at a slower pace than the 2.5% recorded in the first quarter.
Comments