The Reserve Bank of Australia (RBA) has increased interest rates.

The nation’s central bank met Monday and Tuesday of this week for its latest meeting on monetary policy, increasing the official cash rate (OCR) 25 basis points to 4.60%.

The bank cited continued inflation as the primary driver.

“Inflation remains elevated and some of the upside risks flagged in August are materialising,” the RBA board’s statement read. “The conflict in the Middle East has broadened and global energy prices are now much higher than had been assumed in the August forecasts. AI-related demand is driving rapid growth in global prices for technology-related goods. And there remains pressure on domestic capacity.

“Liaison indicates that firms are experiencing cost pressures and are either increasing the prices of their goods and services or looking to do so. Short-term measures of inflation expectations remain elevated,” the board continued. “And recent inflation outcomes in Australia were stronger than expected at the previous meeting.

“Growth in output has slowed but, at the margin, was stronger than expected in the June quarter,” the statement continued. “There are signs that growth in consumer spending is easing gradually as expected, although housing prices have fallen in most capital cities and new housing loans have declined noticeably.

“Since the previous meeting, some of the upside risks to inflation are materialising. The board remains focused on ensuring that high inflation does not become embedded,” the board added. “To achieve this, growth in aggregate demand needs to remain subdued for a period to reduce capacity pressures and bring inflation back to target. The three increases in the cash rate target since the beginning of the year have tightened financial conditions and the economy appears to be slowing. But inflation is still too high and the board judged that, in light of recent developments, a further tightening in financial conditions is warranted to support a return of inflation to target in a reasonable period.

The board will continue to do what it considers necessary to bring inflation sustainably back to target, including increasing the cash rate target further if needed.” The decision was unanimous.

But the move was widely expected by markets, bringing the cash rate to its highest level since November 2011.

The RBA had already raised interest rates three times in 2026, bringing rates to 4.35%, before hitting the pause button at its June and August meetings. The decision reflected the bank’s view that there simply hadn’t been enough time for the previous hikes to fully work their way through the economy, a process that can take months to feed into household spending, borrowing costs and overall demand.

At the same time, the nation’s central bank has been under increasing pressure to bring inflation back down to its target rate between 2% and 3%.

The July consumer price index (CPI), released in August, offered little relief for markets. While inflation is moderating in Australia, it’s still above the RBA target inflationary range of 2% to 3%.

The August CPI won’t be released until Wednesday, leaving the central bank to interpret previous data.

The RBA’s public comments earlier this month about upside risks to inflation likely materialising didn’t help tame investor fears either.

All four of Australia’s Big Four banks quickly updated their forecasts, anticipating rate hikes would come in September.

Meanwhile, mortgage holders and property investors have been under increasing pressure from the tightening cycle, navigating higher borrowing costs at a time when household living expenses remain elevated. Recent tax changes persistent global uncertainty and Australia’s stubborn housing shortage have only compounded the pressure, adding to economic uncertainty and weighing on sentiment across the property market.