The Reserve Bank of Australia (RBA) raised its cash rate by 25 basis points to 4.60% as persistent domestic cost pressures, surging oil prices, and rising global inflation risks threatened to delay a return to the inflation target, according to the minutes of the monetary policy committee's September meeting released on Tuesday.
The members noted that escalating conflict in the Middle East had driven oil prices sharply higher, raising the risk of sustained inflation, while the global artificial intelligence (AI) investment boom was increasing costs for technology products and infrastructure, further intensifying inflationary pressures.
The minutes revealed that domestically, inflation remained above target amid stronger-than-expected underlying price pressures in July, resilient business investment, weak productivity growth, and rising labor costs, while unemployment edged up to 4.6% in August despite expectations of broadly stable labor market conditions in the near term.
The board noted that financial conditions remained moderately restrictive, with household mortgage stress and loan arrears relatively low, but cautioned that rising government debt, volatile bond markets and significant AI-related investment were increasing global financial stability risks.
Members stressed that delaying further action could fuel inflation expectations and complicate efforts to bring inflation back to target, acknowledging that tighter monetary policy could weigh on growth and employment while reaffirming their commitment to price stability and preserving employment gains as much as possible.
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