17 March 2026

Notes

1. 4.10 per cent. While inflation has fallen substantially since its peak in 2022, it picked up materially in the
2. second half of 2025. Information since the February meeting suggests that some of the increase in
3. inflation reflects greater capacity pressures. In addition, the conflict in the Middle East has
4. resulted in sharply higher fuel prices, which, if sustained, will add to inflation. Short-term
5. measures of inflation expectations have already risen. As a result, the Board judged that there is a
6. material risk that inflation will remain above target for longer than previously anticipated. Higher capacity pressures reflect, in part, the greater momentum in demand in the latter part of
7. 2025. Growth in private demand strengthened substantially more than was expected in mid-2025,
8. although the composition of that growth surprised in the December quarter. Business investment was
9. above expectations and consumption was below expectations. Meanwhile, growth in unit labour costs
10. declined. More recently, the unemployment rate has been a little lower than expected and measures of
11. labour underutilisation remain at low rates. Activity and prices in the housing market grew strongly
12. over the past year, although housing price growth moderated somewhat at the start of 2026. Financial conditions have tightened a little this year, but the extent to which monetary policy is
13. restrictive is uncertain. Credit is readily available to both households and businesses and the
14. effects of interest rate reductions in 2025 are yet to flow through fully to aggregate demand, prices
15. and wages. The exchange rate, money market interest rates and government bond yields have risen over
16. the past month. In large part, higher interest rates reflect expectations for the path of monetary
17. policy, which have risen in Australia and most other advanced economies in response to the expected
18. inflationary implications of the conflict in the Middle East. There are material uncertainties about the outlook for domestic economic activity and inflation and
19. the extent to which monetary policy is restrictive. Globally, the conflict in the Middle East poses
20. substantial risks in both directions. A longer or more severe conflict could put further upward
21. pressure on global energy prices; this will push up near-term inflation and could also increase
22. inflation further out if it impairs supply capacity or price rises get built into longer term
23. inflation expectations. Higher prices and prolonged uncertainty may cause growth to be lower in
24. Australia’s major trading partners and also in Australia. Decision A wide range of data over recent months have confirmed that inflationary pressures picked up
25. materially in the second half of 2025. While part of the pick-up in inflation is assessed to reflect
26. temporary factors, the Board judged that the labour market has tightened a little recently and
27. capacity pressures are slightly greater than previously assessed. Developments in the Middle East
28. remain highly uncertain, but under a wide range of possible scenarios could add to global and
29. domestic inflation. In light of these considerations, the Board judged that inflation is likely to remain above target
30. for some time and that the risks have tilted further to the upside, including to inflation
31. expectations. It was therefore 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
32. its decisions. In doing so, it will pay close attention to developments in the global economy and
33. financial markets, trends in domestic demand and the outlook for inflation and the labour market.
34. Monetary policy is well placed to respond to developments and the Board is focused on its mandate to
35. deliver price stability and full employment. It will do what it considers necessary to achieve that
36. outcome. Today’s policy decision was made by majority: five members voted to increase the cash rate
37. target by 25 basis points to 4.10 per cent; four members voted to leave the cash rate
38. target unchanged at 3.85 per cent. Enquiries
39. Communications Department
40. Reserve Bank of Australia
41. SYDNEY
42. Phone: +61 2 9551 8111
43. Email: rbainfo@rba.gov.au