Reserve Bank of Australia raises cash rate to 4.6%

The Reserve Bank of Australia (RBA) has raised its official cash rate by 25 basis points to 4.6%, marking the fourth increase of 2026 and reaching a 15-year high. The decision, made unanimously by the Monetary Policy Board, aims to combat persistent inflation driven by rising global energy prices due to Middle East conflicts and increased demand for artificial intelligence infrastructure.

Major lenders, including Macquarie Bank, are expected to pass the increase on to consumers. For a standard $800,000 mortgage, this could add approximately $122 to monthly repayments. Economists warn that the combination of high household indebtedness and increased living costs may lead to a more significant and prolonged downturn in house prices compared to previous cycles.

While the market reaction was relatively muted, Westpac economists suggest a further rate hike could occur in November if inflation risks persist. The RBA indicated that total demand must remain subdued to bring inflation back within the 2% to 3% target range, even as some analysts express concern regarding the impact on young mortgage holders and the broader economy.