By Shane Rodgers
The Reserve Bank is continuing to use interest rates as a blunt instrument against inflation, lifting the cash rate target by another 25 basis points today.
The base rate is now 4.35 per cent. It was previously at that level between November 2023 and February 2025.
The rise comes despite the inflation distortion of the Middle East war oil shock, and the latest ABS “trimmed” CPI figures (with distortions removed) showing inflation was steady between February and March this year.
It could mean a double blow for families and investors, with the Federal Government tipped to remove the Capital Gains Tax discount in its budget next week.
The Reserve Bank has a mandate to keep inflation between two and three percent and maintain low unemployment.
The headline annual figure for inflation in the year to March was 4.6 percent and the unemployment rate was 4.3 percent in March.
In a statement, the Reserve Bank said inflation picked up materially in the second half of 2025.
“The conflict in the Middle East has resulted in sharply higher fuel and related commodity prices, which are already adding to inflation,” the bank said.
“There are early signs that many firms experiencing cost pressures are looking to increase prices of their goods and services. Short-term measures of inflation expectations have also risen.”
The Bank said that, while financial conditions had tightened this year, credit was readily available to households and businesses.
“The Board assessed that inflation is likely to remain above target for some time and that the risks remain tilted to the upside, including to inflation expectations,” it said.
“It was therefore judged appropriate to increase the cash rate target.”
The increase was backed by an 8-1 Board vote, compared with a highly split decision when rates were increased last month.
The full RBA statement is here
