The Reserve Bank of Australia (RBA) has raised its official cash rate for the second consecutive month, citing growing concerns that inflation may remain above its target range for longer than previously expected.
In a narrow five-to-four decision on Tuesday, the RBA lifted the cash rate by 25 basis points to 4.1 per cent, following an identical increase in February. Economists and money markets had largely anticipated the move, with the likelihood of a hike priced at over two-thirds.
Domestic price pressures, including a tight labour market and strong economic growth, were already pushing inflation above the RBA’s target before the recent US-Israeli conflict with Iran disrupted global energy markets and caused uncertainty in the Strait of Hormuz.
“A wide range of data over recent months have confirmed that inflationary pressures picked up materially in the second half of 2025,” the RBA board said in its statement. “While part of the pick-up in inflation is assessed to reflect temporary factors, the Board judged that the labour market has tightened a little recently and capacity pressures are slightly greater than previously assessed. Developments in the Middle East remain highly uncertain, but under a wide range of possible scenarios could add to global and domestic inflation.”
According to the Australian Bureau of Statistics, headline inflation rose 3.8 per cent in the year to January, keeping it above the RBA’s 2–3 per cent target band. The central bank has historically preferred to move rates after quarterly inflation figures are released, which provide its preferred measure of underlying price growth known as the quarterly trimmed mean.
