RBA rate decision · 05 May 2026

At its meeting today, the Board decided to increase the cash rate target by 25 basis points to [removed: 4.10] [added: 4.35] per cent.

[removed: While inflation has fallen substantially since its peak in 2022, it picked up materially in the second half of 2025. Information since the February meeting suggests that some of the increase in inflation reflects greater capacity pressures. As a result, the Board judged that there is a material risk that inflation will remain above target for longer than previously anticipated.] [added: Inflation picked up materially in the second half of 2025, and information since the beginning of this year confirms that some of this increase reflected greater capacity pressures.] In addition, the conflict in the Middle East has resulted in sharply higher fuel [added: and related commodity] prices, [removed: which, if sustained, will add] [added: which are already adding] to inflation. [added: 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 [removed: already] [added: also] risen.

[removed: Higher capacity pressures reflect, in part, the greater momentum in demand in the latter part of 2025. Growth in private demand strengthened substantially more than was expected in mid-2025, although the composition of that growth surprised in the December quarter. Business investment was above expectations and consumption was below expectations. Meanwhile, growth in unit labour costs declined. More recently, the unemployment rate has been a little lower than expected and measures of labour underutilisation remain at low rates. Activity and prices in the housing market grew strongly over the past year, although housing price growth moderated somewhat at the start of 2026.] [added: The Bank has updated its forecasts to incorporate recent data and developments in the Middle East. The baseline forecast, which assumes that the conflict is resolved soon and fuel prices decline, sees underlying inflation peaking higher than was expected in February. It then declines as demand growth slows and capacity pressures ease in response to higher interest rates.]

[removed: Financial conditions have tightened a little this year, but the extent to which monetary policy is restrictive is uncertain. Credit is readily available to both households and businesses and the effects of interest rate reductions in 2025 are yet to flow through fully to aggregate demand, prices and wages. In large part, higher interest rates reflect expectations for the path of monetary policy, which have risen in Australia and most other advanced economies in response to the expected inflationary implications of the conflict in the Middle East.] [added: Financial conditions have tightened this year.] [removed: The exchange rate, money] [added: Money] market interest rates and government bond yields have [removed: risen over] [added: risen, and] the [removed: past month.] [added: exchange rate has appreciated. But credit is readily available to both households and businesses.]

[removed: Globally, the conflict in the Middle East poses substantial risks in both directions.] There are [removed: material] [added: materially heightened] uncertainties about the outlook for domestic economic activity and [removed: inflation and the extent to which monetary policy is restrictive.] [added: inflation. With the conflict in the Middle East continuing, there are plausible scenarios where inflation is higher and activity lower than envisaged under the baseline forecast.] A longer or more severe conflict could put further upward pressure on global energy prices; this [removed: will] [added: would] push up near-term inflation and could also increase inflation further out [added: as these costs are passed through and] if [removed: it impairs supply capacity or] price rises get built into longer term inflation expectations. [removed: Higher] [added: But higher] prices and prolonged uncertainty may cause growth to be lower in Australia’s major trading partners and also in Australia.

Decision

[removed: A wide range of data over recent months have confirmed that inflationary pressures picked up materially in the second half of 2025. While part of the pick-up in inflation is assessed to reflect temporary factors, the Board judged that the labour market has tightened a little recently and capacity pressures are slightly greater than previously assessed. Developments in the Middle East remain highly uncertain, but under a wide range of possible scenarios could add to global and domestic inflation.] [added: As expected, developments in the Middle East are having an impact on inflation. Higher fuel prices are adding to inflation and there are indications that this is likely to have second-round effects on prices for goods and services more broadly. This inflation impulse is in addition to the high inflation recorded around the start of 2026, reflecting capacity pressures in the economy.]

In light of these considerations, the Board [removed: judged] [added: assessed] that inflation is likely to remain above target for some time and that the risks [removed: have] [added: remain] tilted [removed: further] to the upside, including to inflation expectations. It was therefore [added: judged] appropriate to increase the cash rate target.

The Board will be attentive to the data and the evolving assessment of the outlook and risks to guide its decisions. In doing so, it will pay close attention to developments in the global economy and financial markets, trends in domestic demand and the outlook for inflation and the labour market. [removed: Monetary] [added: Having raised the cash rate three times, monetary] policy is well placed to respond to developments and the Board is focused on its mandate to deliver price stability and full employment. It will do what it considers necessary to achieve that outcome.

Today’s policy decision was made by majority: [removed: five] [added: eight] members voted to increase the cash rate target by 25 basis points to [removed: 4.10] [added: 4.35] per cent; [removed: four members] [added: one member] voted to leave the cash rate target unchanged at [removed: 3.85] [added: 4.10] per cent.