The Reserve Bank of Australia raised its cash rate target by 25 basis points to 4.85% on Tuesday, according to a statement by the central bank.
Six monetary policy board members voted for the increase, while three voted to leave the rate unchanged at 4.60%, the statement said.
The board said inflation is now expected to stay above 3% over the coming year, with a growing risk that higher inflation expectations will become embedded.
Given the revised outlook and continuing upside risks, the board judged that further tightening in financial conditions is warranted to help bring inflation back to target, the statement said.
The RBA expects inflation to stay elevated through much of 2027 and is not expected to reach the top of the 2% to 3% target range until late 2027, about three quarters later than previously forecast, which the central bank said poses upside risks to inflation expectations, with some measures assessed to have risen recently.
The board said it will continue to do what it considers necessary to bring inflation sustainably back to target.
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