The Reserve Bank of Australia (RBA) has lifted the official cash rate by another 25 basis points, the third hike this year as it struggles to keep inflation under control.

The increase takes the cash rate to 4.35%, and fully reverses the three rate cuts delivered in 2025. The hike had been widely expected by economists after a sharp rise in inflation figures last week. RBA Governor Michele Bullock told a media conference:

Inflation in Australia was already too high before the recent conflict in the Middle East began. We must get on top of inflation now so it doesn’t get get away from us.

Inflation in Australia was already too high before the recent conflict in the Middle East began. We must get on top of inflation now so it doesn’t get get away from us.

The reason is clear: inflation is too high. The latest figures showed annual consumer price inflation rose to 4.6% in March, up from 3.7% in February.

The jump was driven heavily by higher fuel prices triggered by the war in Iran, which began on February 28.

The RBA cannot simply dismiss this as a temporary oil price shock. Its preferred measure of underlying inflation, the trimmed mean, was still 3.3% in March. That is above the RBA’s 2–3% target band. It suggests price pressures are not only coming from petrol prices, but are spreading across parts of the domestic economy.

As the RBA noted in its post-meeting statement,

Higher fuel prices are adding to inflation and there are indications that this is likely to have second-round effects on........

© The Conversation