Highlights

  • The September 2026 Board considered only two options: raise 25 basis points or hold the cash rate unchanged.
  • Holding was considered only briefly before the Board moved on to discuss the case for raising.
  • The decision to raise to 4.60% was unanimous across all nine Board members.
  • Market pricing ahead of the meeting implied around 15 basis points of tightening by year-end and 30 basis points in the first half of 2027.

The Monetary Policy Board's September 2026 meeting was notable not only for what it decided, but for how narrow the deliberations were. Only two options were formally on the table: raise the cash rate target by 25 basis points, or hold it steady. No other paths were considered.

Two Options, Not Three

The minutes of the 29 September Board meeting recorded that the Board considered only a 25 basis point increase or a hold. A larger increase was not on the agenda. This narrowing of options reflects the Board's practice of considering a defined set of alternatives at each meeting rather than the full range of theoretically possible outcomes.

The case for holding was considered only briefly. The minutes noted the argument that downside employment risks provided a reason to pause. However, the Board assessed that the balance of evidence, particularly inflation above target and excess demand greater than previously assessed, supported action.

The Case for Raising

The Board's reasons for raising centred on several concerns: excess demand in the economy was assessed as greater than previously thought, global cost pressures including oil were pushing inflation higher, and the risk that inflation could become embedded if the Board did not reinforce its commitment to returning it to target was significant.

Anchoring inflation expectations was an explicit consideration. The Board concluded that taking action was prudent to reinforce that expectations and prevent a drift away from the 2-3% target range becoming entrenched in price and wage-setting behaviour.

The Unanimous Decision

All nine members of the Board voted to raise the cash rate target by 25 basis points to 4.60%, effective 30 September 2026. Unanimity on a rate increase reinforces the credibility of the decision and reduces the risk that markets interpret the move as contested or potentially reversible.

Market pricing at the time of the decision implied around 15 basis points of additional tightening by year-end and approximately 30 basis points in the first half of 2027. These are market inferences drawn from futures pricing, not RBA guidance.