RBA Hikes Rates to 4.6%, Maintains Hawkish Stance Amid Elevated Inflation Pressures

The Reserve Bank of Australia (RBA) raised the cash rate by 25 basis points to 4.6% in its September meeting, marking the fourth hike this year and taking rates to their highest level in around 15 years.

The decision was widely expected, but the tone of the RBA's statement was more important for markets. The central bank maintained a hawkish stance, focusing on persistent inflation pressures and the risk that policy may need to become more restrictive.

RBA Governor Michele Bullock emphasized that underlying inflation remains elevated across services, groceries, and consumer durables, suggesting price pressures extend beyond the latest energy shock. She also highlighted that monetary policy works with long lags and that the RBA still needs to assess the impact of this year's tightening.

The Australian dollar has weakened broadly despite the RBA's hike, with markets now focused on how much further the central bank may need to tighten. Bullock's comments suggested that additional hikes remain on the table if inflation does not fall convincingly, and that policy is already restrictive, with financial conditions tight and the RBA near the top of its estimated neutral range.