Four quarter-point rises and one pause have lifted the cash rate target by a full percentage point since February, and the Monetary Policy Board says it stands ready to move again if inflation requires it.

Before the Monetary Policy Board's first decision of 2026, the cash rate target stood at 3.60 per cent. It is now 4.60 per cent, effective from 30 September. The full percentage point of tightening arrived in four equal steps of 25 basis points, spread across eight months and broken by a single pause in August.

For anyone trying to follow the year's policy story, the sequence matters as much as the destination. Each decision was made against a slightly different set of data, and the reasons the Board gave shifted as the months went by. Laying the moves out one by one helps explain how the Reserve Bank arrived at today's setting, and why the Board describes the next step as an open question.

The 2026 sequence, decision by decision

Drawing on the Board's published statements and minutes, the path looks like this:

  • 3 February: a 25 basis point rise to 3.85 per cent, decided unanimously.
  • 17 March: a further 25 basis points, taking the target to 4.10 per cent.
  • 5 May: another 25 basis points, to 4.35 per cent.
  • August (meeting held 10–11 August): the rate was left at 4.35 per cent, again unanimously.
  • 29 September: a fourth rise of 25 basis points, to 4.60 per cent, also unanimous.

Governor Michele Bullock summed up the first phase at her 29 September media conference: "We raised interest rates three times earlier in the year." The September increase made it four, for a combined 100 basis points.

The rhythm is worth noticing. Three rises came in relatively quick succession between February and May. The Board then stepped back to assess their impact before resuming in September. One way to read that pattern is as a central bank balancing two risks at once: doing too little while inflation stays high, and doing too much before earlier moves have had time to work.

Why the Board paused in August

The August hold is the hinge of the year. The minutes of that meeting, published on 25 August, show members weighed two options: raise the cash rate by 25 basis points, or leave it unchanged "for the time being". They chose to hold, while "remaining alert to the upside risks to the inflation outlook".

Two days after that meeting concluded, Assistant Governor (Financial Markets) Christopher Kent explained the thinking at a fireside chat in Sydney. "The current cash rate is around the top of the range of central estimates of the neutral rate," he said, noting that "the Board judged that monetary policy is somewhat restrictive." In his view, "the three cash rate increases earlier this year are having their intended effects."

The minutes also recorded that market pricing at the time implied "around half a chance of a further 25 basis point increase by the end of 2026". Financial markets, in other words, saw another move before the end of the year as roughly an even bet. The Board itself kept its options open, saying it "will continue to do what it considers necessary".

What changed by September

By the 29 September meeting, the Board judged that some of the upside risks it had flagged in August were materialising. Its statement pointed to a broader conflict in the Middle East and higher global energy prices, AI-related demand pushing up the prices of technology goods, capacity pressures in the domestic economy, and firms raising, or planning to raise, their prices. Short-term inflation expectations were described as high, and recent inflation outcomes had been stronger than expected.

The Board also acknowledged the softer side of the picture. Output growth had slowed, though it was stronger than expected in the June quarter. Consumer spending was easing gradually, housing prices had fallen in most capital cities and new housing loans had declined noticeably. The labour market had eased broadly as expected. Against that, business investment and debt growth were strong.

Weighing it all up, the Board judged that "a further tightening of financial conditions" was warranted to return inflation to target within a reasonable period. Bullock put it more plainly: "Higher interest rates are needed to ensure inflation returns to target." She added: "Inflation is too high and has been driven by domestic capacity pressures."

The inflation readings behind the map

Two different measures sit behind these decisions, and they are worth keeping apart. Headline inflation, which covers the full basket of consumer prices, was 3.9 per cent over the year to the June quarter, and the monthly CPI indicator showed an annual rate of 4.0 per cent for August. Underlying inflation, measured by the trimmed mean, was 3.6 per cent over the year to the June quarter. At the September press conference, Bullock described underlying inflation as "about 3.5 per cent", roughly a percentage point above the 2.5 per cent midpoint of the 2–3 per cent target range.

The RBA's most recent published forecasts, in the August Statement on Monetary Policy, had headline inflation returning to the target range by early 2027, with trimmed mean inflation taking longer to reach the midpoint. Those forecasts were prepared on a cash rate assumption of around 4.3 to 4.5 per cent, before the September hike, so they do not capture the latest move. Appearing before a parliamentary committee on 18 September, Bullock said "inflation will not return to around the midpoint of the target range until late 2027."

The bottom line

The 2026 map shows a Board that moved steadily in the first five months, paused to take stock, then resumed once the risks it had been watching began to appear in the data. The cumulative result is a cash rate 100 basis points higher than before February, and Bullock has stressed that the full impact is yet to be felt: "A lot of that effect is still to flow through."

What comes next is not marked on the map. "The Board will increase interest rates again if that's what's needed to get inflation down," Bullock said, while making clear she would not pre-commit: "I'm not going to give you forward guidance." The minutes of the September meeting are due at 11.30 am AEDT on 13 October, the next CPI release is scheduled for 28 October, and the Board's next decision will be announced at 2.30 pm on 3 November. Until then, the next point on the line remains undrawn.