RBA Raises Cash Rate to 4.6% as Inflation Risks Remain Elevated

The Reserve Bank of Australia (RBA) raised its cash rate by 25 basis points to 4.6%, its highest level in around 15 years, as it continues to battle elevated inflation pressures.

RBA Governor Michele Bullock emphasized that inflation risks remain skewed higher and that the central bank will raise rates again if needed to combat persistent price growth.

The RBA cited strong household spending data from August, which showed a slowdown in discretionary spending, as evidence that its previous rate hikes are starting to take effect. However, underlying inflation remains well above the RBA's target range, and Bullock noted that core inflation is still a key hurdle for the central bank.

The Australian dollar has weakened broadly despite the RBA's decision, with markets now focused on how much further the central bank may need to tighten monetary policy. The decline in AUD/JPY is consistent with some defensive demand, but the Aussie's gain against the Swiss franc suggests this is not a straightforward risk-off move.