RBA lifts interest rates by 0.25pc as inflation rises

The Reserve Bank has lifted interest rates by 0.25 percentage points, as had been widely forecast.

The new cash rate is 3.85 per cent, up from 3.6 per cent.

“While inflation has fallen substantially since its peak in 2022, it picked up materially in the second half of 2025,” the RBA Board said in a statement.

“The Board has been closely monitoring the economy and judges that some of the increase in inflation reflects greater capacity pressures. As a result, the Board considers that inflation is likely to remain above target for some time.

“Capacity pressures reflect, in part, the greater momentum in demand seen in recent months. Growth in private demand has strengthened substantially more than expected, driven by both household spending and investment. 

“Activity and prices in the housing market are also continuing to pick up,” it said.

It said conditions in the labour market were also “a little tight” and had stabilised in recent months, in line with the pick-up in momentum in economic activity.

The RBA had cut interest rates three times last year as inflation declined. Its last rate cut occurred in August.

This is the RBA’s first monetary policy meeting of 2026.

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