Decision comes as central bank attempts to get inflation under control
The Reserve Bank of Australia (RBA) under governor Michelle Bullock (pictured) has decided to increase the cash rate by 25 basis points to 3.85%.
In announcing the decision, the central bank highlighted persistent inflationary pressures: "While inflation has fallen substantially since its peak in 2022, it picked up materially in the second half of 2025.
"The Board has been closely monitoring the economy and judges that some of the increase in inflation reflects greater capacity pressures. As a result, the Board considers that inflation is likely to remain above target for some time."
Labour conditions also remain too tight for the Monetary Policy Board.
"The unemployment rate has been a little lower than expected and measures of labour underutilisation remain at low rates," said the Board. Growth in the Wage Price Index has eased from its peak, but broader measures of wages growth continue to be strong and growth in unit labour costs remains high."
Somewhat surprisingly, the Board was unanimous in its decision to hike rates for the first time in over two years, suggesting the dovish contingent of the Board has capitulated to the realities of unchecked inflation.
Looking ahead, the Board said it "will be attentive to the data and the evolving assessment of the outlook and risks to guide its decisions".
In doing so, "it will pay close attention to developments in the global economy and financial markets, trends in domestic demand, and the outlook for inflation and the labour market".
Stay tuned to MPA for further analysis and broking industry reactions following today’s momentous RBA call.
