The Reserve Bank of Australia unanimously raised its cash rate by 25 basis points to 4.6% on 29 September 2026, the highest level since 2011 and the fourth increase of the year. Governor Michele Bullock cited the global AI boom as a driver of significant price rises and elevated domestic economic demand. The RBA stated that inflation concerns are being realised and indicated readiness to raise rates further if conditions warrant.
Despite the rate increase, the Australian dollar weakened, trading near 0.6999 against the US dollar in the aftermath of the decision. The US dollar strengthened broadly against six of seven major currencies tracked at that time, with only the yen registering gains against it.
The AUD/USD exchange rate is the primary market instrument directly affected, reflecting the divergence between the RBA's tightening stance and the currency's post-decision decline. The ASX 200, Australia's benchmark equity index, is connected to the rate decision through its large weighting in financials, banking, and real estate sectors — all directly exposed to higher borrowing costs. The rate rise increases mortgage repayment costs for millions of Australian borrowers.
Australia's August CPI data, released on 30 September 2026, showed headline inflation at 4.0% year-over-year — above the RBA's 2–3% target band — while the monthly trimmed mean core reading came in at 0.2%, softer than expected. Following that release, market pricing for a further RBA hike in November fell to around 25%.
Sources: Guardian Business, investinglive.com, Bloomberg Markets