The Reserve Bank of Australia (RBA) has increased the cash rate from 4.1% to 4.35%.
The RBA is Australia’s central bank. It meets eight times a year to adjust interest rates to keep inflation in check.
In its statement today, the RBA said the U.S-Israel war with Iran has “resulted in sharply higher fuel... adding to inflation.”
Here’s what you need to know.
Interest rates
The cash rate is what the RBA charges banks for short-term loans.
We usually refer to changes in the cash rate as the RBA changing interest rates, because the cash rate affects interest rates across the economy, including home loans.
The higher the interest rate, the more expensive it is to spend and borrow money (increasing mortgage repayments).
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The idea is that making it more expensive to borrow will slow spending and, in turn, the growth of inflation.
Latest decision
In announcing the rate hike, the RBA said inflation “picked up” in the second half of 2025.
As the Middle East war continues, the RBA noted “there are plausible scenarios where inflation is higher and activity lower” than it had forecast.
This is the third hike in a row for the RBA, after holding steady across the previous three meetings.
Eight members of the RBA Board voted to increase the rate to 4.35%, while one voted to leave it unchanged.
