RBA interest rates: Reserve Bank hikes cash rate to 4.6%, the highest level since 2011

The Reserve Bank of Australia (RBA) has increased its key interest rate to 4.6%, the highest level since 2011, from 4.35%. This widely anticipated decision marks the fourth consecutive hike in interest rates this year, imposing additional financial burdens on millions of Australian homeowners with mortgages. Experts predict that the release of data on Wednesday will reveal underlying inflation surging at an annual rate of 3.6% for the third consecutive month in August, well beyond the RBA's target range of 2% to 3%.

RBA Governor Michele Bullock anticipates that workers and businesses may begin demanding higher wages and prices in response to the persistent inflation. Meanwhile, Treasurer Jim Chalmers attributes the surge in inflation to the US war on Iran, rather than government spending, in an interview with Channel Seven. Chalmers stated, "When you see what’s happening with global oil prices, when you see what’s happening with the re-escalation of the war in the Middle East, obviously, factually, that is one of the big drivers of that inflation."

Prior to the decision, financial markets had been anticipating another rate hike by February and a more than 50% probability of further increases by mid-2027. RBA Governor Bullock is scheduled to address the press at 3:30pm AEST in Sydney to provide further insights into the rationale behind the decision.