Australia's Cash Rate Hits 4.6% as RBA Battles Inflation

The Reserve Bank of Australia (RBA) raised its cash rate by 25 basis points to 4.6%, marking the fourth increase this year, and a 15-year high.

This decision was made in response to inflation that continues to sit above the RBA's target range of 2-3%. The latest inflation data released by the Australian Bureau of Statistics showed that the consumer price index rose 4% in the 12 months to August, up from 3.5% in July.

The RBA is not alone in lifting rates, with other central banks such as the US Federal Reserve, European Central Bank, Bank of Japan, and Reserve Bank of New Zealand having raised rates recently. However, Australia now has the second-highest central bank rate among developed countries.

Rising inflation and interest rates have been linked to government spending, which has been driving domestic capacity pressures according to RBA Governor Michelle Bullock. Former RBA governor Philip Lowe also stated that government spending has been adding to demand progressively over time, putting upward pressure on inflation.