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RBA raises cash rate by 25 bps to 4.60% with dovish tweaks
The RBA removed its prior forecast that inflation would return to the midpoint of the target range in late 2027, saying instead that tightening will be needed only to return inflation to target within a reasonable period.
The Reserve Bank of Australia lifted its cash rate by 25 basis points to 4.6%, saying upside risks to inflation had materialized and that further tightening was needed to keep financial conditions restrictive, according to Forexlive.
In its statement, the RBA also shifted its forward guidance, dropping a previous reference to inflation returning to the midpoint of the target range in late 2027 and replacing it with language indicating that additional tightening would be required to bring inflation back to target within a reasonable period.
The RBA further adjusted guidance on future hikes, changing from raising rates if upside risks materialise to doing so only “if needed,” suggesting a higher hurdle for additional tightening, Forexlive reported.
In her remarks, Governor Bullock said the RBA considered only holding rates or hiking by another 25 bps at this meeting, while noting that inflation pressures were likely to last longer than previously expected and that the impact of policy works with a 12 to 18 month lag, with not all of the hikes already delivered yet passed through the economy.