By Fatma Younis
Australia's central bank has lifted its benchmark interest rate to 4.85 per cent, the highest level in 18 years, marking the fifth increase this year as policymakers struggle to contain stubborn inflation.
Governor defends decision
Reserve Bank of Australia Governor Michele Bullock said the move was necessary to prevent more serious economic consequences later, acknowledging the added financial pressure on millions of mortgage holders. "Some pain now will prevent even worse pain down the track," she told reporters.
Board divided on hike
The monetary policy board split six to three in favour of the increase, according to the Australian Broadcasting Corporation. Markets have lowered expectations of another hike before Christmas, though a further rise by May 2027 remains possible.
Economic outlook
The RBA's new forecast sees economic growth slowing "markedly" but not falling into recession. Inflation is expected to peak around 4.5 per cent by late 2026 before dropping below three per cent by late 2027. GDP growth is projected at 1.6 per cent in 2026 and 1.3 per cent in 2027, with unemployment rising toward five per cent by 2028.
