Reserve Bank of Australia raises cash rate by 25 bps to 3.85%

While inflation has eased significantly from its 2022 peak, the Board noted that recent price pressures partly reflect stronger demand and capacity constraints. Private demand growth has exceeded expectations, Reserve Bank of Australia (RBA) said in a release.

Reserve Bank of Australia has raised the cash rate by 25 basis points to 3.85 per cent, citing a renewed pick-up in inflation during the second half of 2025.
The Board said stronger-than-expected private demand, easing financial conditions and persistent labour market tightness are adding to capacity pressures, keeping inflation above target for longer.
The decision was unanimous.

Financial conditions had eased through 2025, credit remained readily available, and earlier rate cuts were yet to fully feed through to demand, prices and wages. Labour market conditions remain tight, with unemployment lower than expected and unit labour costs still elevated despite some moderation in wage growth.

Looking ahead, the Board said that stronger domestic demand alongside limited supply capacity could further intensify inflation pressures. Global uncertainties persist, but growth among Australia’s major trading partners has so far surprised on the upside. The decision to raise rates was unanimous, with policymakers reaffirming their commitment to price stability and full employment.

Fibre2Fashion News Desk (HU)