The Reserve Bank of Australia raised the cash rate target by 25 basis points to 4.60% on 29 September 2026, extending the tightening cycle as Inflation remained above target. The decision lifted the policy rate from 4.35% and brought Mortgage costs, inflation trends and the RBA’s next policy steps back into focus.

The cash rate target is currently 4.35 per cent, according to the RBA's August decision statement. A a 25-basis-point increase would lift it to 4.6 per cent, the highest level since the start of November 2011. All 29 economists surveyed by Bloomberg expected it. Investinglive, a market news site, separately reported that 33 of 34 economists polled by Reuters expected the move.

How the board got here

The board has raised rates three times this year. On 3 February it lifted the target by 25 basis points to 3.85 per cent, with Governor Michele Bullock saying the underlying pulse of inflation was too strong. On 17 March it raised the rate to 4.10 per cent in a 5-4 split, with the dissenters preferring to wait seven weeks rather than oppose tightening in principle. On 5 May it moved to 4.35 per cent, with eight members in favour and one preferring no change.

The board then paused. It held on 16 June and again on 11 August, when the minutes record a unanimous decision to leave the rate at 4.35 per cent while remaining ready to act if upside inflation risks materialised. The minutes said those risks were significantly skewed to the upside, citing Middle East conflict and oil prices, cost pass-through and AI-related investment.

What the data show

The Australian Bureau of Statistics reported on 29 July that consumer prices rose 3.8 per cent in the year to June 2026, with trimmed mean, the underlying measure, at 3.6 per cent. On 26 August it reported that the monthly CPI rose 3.5 per cent in the year to July, while trimmed mean stayed at 3.6 per cent. The August monthly CPI is scheduled for release on 30 September, after the board meets.

On the labour market, the ABS said on 24 September that Unemployment in August was 4.6 per cent, up 0.2 percentage points, with employment up 39,500. The gain was entirely part-time, and the ABS cautioned that a new survey collection model began in August.

In its August Statement on Monetary Policy, the RBA forecast trimmed mean inflation of 3.3 per cent by December 2026 and 2.6 per cent by December 2027, with unemployment rising to 4.5 per cent by December 2026. Those forecasts assumed market expectations as at 5 August.

Market pricing and what to watch

Market pricing before the decision implied a high probability of a rate increase. Such market-derived expectations can change during trading sessions.

Economist forecasts have varied, with some expecting the cash rate to remain at current levels while others have discussed the possibility of further changes depending on inflation data. These are forecasts rather than board guidance.

Beyond the rate itself, attention will be on the board's statement and Governor Bullock's news conference for guidance on future moves. Canstar estimated that a 25-basis-point rise adds about $91 a month to repayments on a $600,000 mortgage if lenders pass it on in full.

Risks and caveats

September Decision Lifts Cash Rate to 4.60%

At its 29 September 2026 meeting, the RBA Monetary Policy Board increased the cash rate target by 25 basis points to 4.60%. The increase followed earlier rate rises in February, March and May and pauses in June and August.