RBA raises cash rate to 4.85 percent, highest since 2008

The Reserve Bank of Australia has increased the cash rate by 0.25 percentage points to 4.85 percent, the highest level since late 2008. The Monetary Policy Board approved the move by a six-to-three vote, with three members preferring to keep the rate unchanged at 4.60 percent.

This is the fifth interest rate increase in 2026. The RBA said inflation is now expected to remain high throughout much of 2027 and is not forecast to fall below 3 percent until late 2027, about three quarters later than previously projected.

“Another rate rise could hardly come at a more difficult time for retailers and the households they serve.”

For a typical 600,000 dollar mortgage, the increase adds roughly 100 dollars a month to repayments. Households with high-interest savings accounts may earn more interest if their banks pass on the higher rates.

Retailers are preparing for a difficult Black Friday and Christmas period. The Australian Retail Council warned that the rise will further squeeze household spending as businesses face higher borrowing, freight, wages and operating costs.

PRD chief economist Diaswati Mardiasmo said the central bank has lost patience because inflation is on an increasing pattern. She noted that higher rates may not fully slow inflation when external factors such as Middle East conflict drive up fuel prices.

Headline inflation rose to 4.3 percent in the year to September, up from 4.0 percent in August. The RBA board left the door open for further rate hikes if needed.

The RBA wants annual consumer price inflation to average around 2.5 percent over the cycle.