RBA raises interest rate to 4.6%: fourth hike this year, further increase not ruled out.

The Reserve Bank of Australia raised its policy rate to 4.6 per cent on Tuesday, the highest level in 15 years, as the country seeks to contain inflation triggered by the Middle East conflict. The 25 basis point increase in the cash rate was in line with what economists surveyed had expected. The Reserve Bank of Australia (RRBA) has raised rates four times this year, by a cumulative 100 basis points, as inflation remains stubborn. The RBA said in its statement that some of the upside risks it had flagged at its August meeting were now materialising. "The Middle East conflict has widened and global energy prices are now well above earlier assumptions," the central bank wrote, adding that AI-related demand was driving rapid price increases in technology goods. The RBA also said it would "continue to do what it considers necessary" to contain inflation, including further increases in the policy rate. The S&P/ASX 200 index and the Australian dollar were both little changed after the policy decision. In 2026, Australia's inflation rate has remained above its 2-3 per cent target range, hitting a high of 4.6 per cent in March. The country's latest published inflation rate was 3.5 per cent for July, exceeding expectations. August data will be released on Wednesday. A Bank of America report last week said inflation was accelerating rather than converging towards target. "The July CPI is the clearest evidence of this shift and extends the trend of rising core inflation in recent months." Bank of America said there was also evidence of second-round effects from energy costs, further reinforcing the risk that inflation is becoming entrenched. "The Middle East conflict remains unresolved, and there is a scenario in which inflation is higher than forecast and economic activity is lower than forecast," the RBA wrote. The central bank had previously warned that the country's economic growth would slow as interest rates rise. Australia's economy grew 2.1 per cent in the second quarter, down from 2.5 per cent in the first three months of the year.