Breaking: RBA lifts interest rates to highest level in 18 years to try to dampen inflation
RBA lifts interest rates to highest level in 18 years, in majority decision by RBA board.
The Reserve Bank of Australia (RBA) has increased interest rates by 0.25 percentage points to reach a historic high of 4.85 per cent, signalling a shift in monetary policy to combat inflation. This decision marks the fifth rate hike in the year 2026 and is the highest cash rate since late 2008. The RBA anticipates that inflation will remain elevated throughout much of 2027 and is not projected to fall below 3 per cent until late 2027, a delay of approximately three quarters compared to earlier projections.
Despite the unanimous vote by six members of the RBA board to raise the cash rate target to 4.85 per cent, three other members opted to leave the cash rate unchanged at 4.60 per cent. The decision was driven by concerns that inflation expectations were drifting upwards and could pose risks to the economy if left unchecked. The RBA expects annual inflation in consumer prices to average around 2.5 per cent over the economic cycle, but warns that businesses increasingly anticipate inflation to settle between 3 to 3.5 per cent as the new normal.
The rate hike is expected to impact households with mortgages negatively, while individuals with high-interest savings accounts may benefit from earning more interest on their savings. However, the full economic impact of this rate increase is not expected to be realized until 2028, as it typically takes between 12 to 18 months for monetary policy changes to permeate through the economy.
Written by urgent.news from ABC News AU's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
