RBA Lifts Cash Rate to 4.85%, Highest in 18 Years, Amid Persistent Inflation

What’s happening

The Reserve Bank of Australia raised its cash rate by 25 basis points to 4.85%, marking the highest level since 2008 and the fifth hike this year. The decision signals the RBA's determination to combat "materially" elevated inflation despite housing market weakness and rising unemployment risks.

Market impact

The rate hike pressures Australian equities and the AUD, while deepening stress on mortgage holders already burdened by prior increases. The move also signals divergence from other central banks easing policy, potentially attracting carry trade flows and complicating regional currency dynamics.

Broader implications

Australia's aggressive tightening cycle reflects stubborn inflation expectations and wage growth, contrasting with Fed and ECB pivot toward cuts. The RBA's hawkish stance risks amplifying housing affordability crises and consumer debt stress in a slowing economy.