The Reserve Bank of Australia raised its cash rate target by a quarter of a percentage point to 4.60% in a unanimous decision. The bank said some inflation risks it identified in August had materialised, including higher global energy prices. The increase changes the benchmark facing borrowers and savers while the bank continues to assess price pressures.
Economics & Markets··Evening
The board votes unanimously for another rise
The Reserve Bank of Australia’s Monetary Policy Board raised its cash rate target by 25 basis points to 4.60% at its September 29 meeting. ABC News also reported the quarter-point increase. The board voted unanimously, saying some inflation risks it had identified in August had materialised. This is the benchmark cash rate target set by the central bank, not the rate on every existing household loan. The bank said three earlier increases this year had already tightened financial conditions.[1], [2]
Energy and capacity pressures weigh on prices
The bank said the broader Middle East conflict had pushed global energy prices well above the assumptions in its August forecasts. It also cited rising global technology-goods prices associated with artificial intelligence demand and pressure on Australia’s domestic productive capacity. In conversations with the bank, businesses described higher costs and either raising prices or considering it. Recent inflation readings had exceeded what the board expected at its previous meeting, and short-term inflation expectations remained high. The bank said some fuel cost increases had spread into other goods and services.[1]
Activity slows even as investment remains firm
The board also described a slowing economy. Consumer spending growth was easing, housing prices had fallen in most major cities, and new housing lending had declined noticeably. Labour-market conditions softened broadly as expected, though business investment and borrowing remained strong. June-quarter output growth was slightly stronger than the bank had forecast despite the broader slowdown. The board said the unresolved conflict could bring both higher inflation and weaker activity. It will assess new data and said it could raise the cash rate again if needed to return inflation sustainably to target.[1]
