Live updates: RBA hikes cash rate to 4.35 per cent, flags further risks

The Reserve Bank of Australia has flagged that things may continue to get worse in the future, warning that underlying inflation will peak higher than it anticipated in February.

"The Board assessed that inflation is likely to remain above target for some time and that the risks remain tilted to the upside, including to inflation expectations," it wrote.

"It was therefore judged appropriate to increase the cash rate target."

The RBA's baseline forecast assumes the Middle East conflict will be resolved soon and fuel prices will decline — but even under that optimistic scenario, the bank says inflation will only decline as "demand growth slows and capacity pressures ease in response to higher interest rates".

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But it also flagged a more grim scenario, warning that a longer or more severe conflict could see inflation higher and activity lower than the current baseline forecast.

"A longer or more severe conflict could put further upward pressure on global energy prices; this would push up near-term inflation and could also increase inflation further out as these costs are passed through and if price rises get built into longer-term inflation expectations," the bank said.

"But higher prices and prolonged uncertainty may cause growth to be lower in Australia’s major trading partners and also in Australia."

— Alexandra Koster

Today's decision to raise the cash rate was not unanimous, with one member of the Reserve Bank board voting to hold the cash rate at 4.10 per cent.

Eight members voted in favour of the 0.25 percentage point increase to 4.35 per cent.

The RBA does not identify individual board members in its statements, so it is unclear who cast the dissenting vote.

— Alexandra Koster

The Reserve Bank of Australia has cited inflation and the war in the Middle East as key reasons for lifting the cash rate.

"Inflation picked up materially in the second half of 2025, and information since the beginning of this year confirms that some of this increase reflected greater capacity pressures," a statement by the RBA read.

The bank also pointed to the Middle East conflict driving up fuel and commodity prices, with early signs that firms are passing those cost pressures on to consumers.

"Short-term measures of inflation expectations have also risen," the board said.

— Alexandra Koster

The Reserve Bank of Australia (RBA) has increased the official cash rate from 4.10 per cent to 4.35 per cent, an increase of 0.25 percentage points.

It is the Reserve Bank's third consecutive hike this year, bringing the cash rate back to 2024 levels and effectively undoing the savings from the last three cash rate cuts.

The decision comes after inflation rose to 4.6 per cnet in March — its highest level since 2023 — driven largely by surging fuel prices tied to the ongoing conflict in the Middle East.

— Alexandra Koster

The CAMA RBA Shadow Board — a group of Australian economists with no affiliation to the Reserve Bank of Australia — also recommended the cash rate be raised this week, citing a "71 per cent probability that raising the rate above 4.10 per cent is warranted".

The board offers its own policy recommendations a day before the official RBA decision, rather than predicting RBA board behaviour.

It says the main driver is inflation, which is up to 4.6 per cent in March compared to 3.7 per cent in February.

"Housing and transport were the main contributors, with automotive fuel prices surging in March as the Iran war and the disruption around the Middle East pushed oil prices sharply higher, noting that the March reading preceded the 1 April halving of the fuel excise," the Shadow Board wrote.

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"At the same time, the unemployment rate has risen only gradually, to 4.3 per cent," they wrote, adding that it leaves the policy mix in an "awkward position" ahead of the federal budget, set to be handed down on 12 May.

There's also trouble in the business sector, the board says.

"The business-sector data describe an economy hit by a stagflationary shock: weaker confidence and slower momentum, but also higher costs and more difficult inflation dynamics."

It also predicts more rate rises ahead, with the board putting a 70 per cent probability on rates needing to go higher over the next six months.

— Alexandra Koster

Good question.

Whenever we talk about interest rates — and the potential of a rate rise — we're often talking about inflation alongside it, as it acts as a big determining factor for the RBA's decisions.

Earlier this month, Australian Bureau of Statistics figures showed inflation rose to its highest level since 2023 in March, as the war in the Middle East continues to add widespread price pressures.

Canstar's Sally Tindall says a rate rise would be looking to curb rising inflation to below 3 per cent.

Think about inflation as the cost of a carton of eggs. When inflation goes up, so too does the price you'll pay for that carton.

Central banks raise interest rates to cool down consumer spending. A rate rise means it costs more to borrow, repayments are higher, and there's more incentive to save — so people spend less.

In turn, the price of goods is moderated because fewer people can afford that expensive carton of eggs.

Banks pass on the cash rate rise to borrowers, meaning mortgage repayments increase. That all adds up to less money floating around the economy that would otherwise push prices up.

— Alexandra Koster, Cameron Carr

All four banks are predicting a rate rise today.

ANZ, CBA and NAB all currently predict a rise of 0.25 per cent in May, bringing the cash rate to 4.35 per cent.

But Westpac expects the cash rate hikes to continue, forecasting two further 0.25 percentage hikes in June and August, which would bring the rate to 4.85 per cent.

SBS News reporter Cameron Carr wrote all about this yesterday — give it a read below.

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The RBA's rates call could 'come down to the wire'. This is what it means for you

— Alexandra Koster

That depends if you’re a homeowner or not — and how recently you bought.

Source: SBS

Finder analysis predicted that Aussies with an average home loan of $736,259 would fork out an extra $2,657 a year on their mortgage if the cash rate rises by 25 basis points today.

That's compared to what they were paying before the RBA started hiking the cash rate this year.

Cash rate is the interest rate that banks pay other banks and lenders, and it influences all other interest rates.

Canstar analysis estimated that a 0.25 percentage point hike today would mean borrowers could pay an extra $91 a month on a $600,000 mortgage.

READ MORE

The RBA's rates call could 'come down to the wire'. This is what it means for you

If the RBA decides to increase the cash rate, it will be the third hike this year, totalling a $272 rise in monthly repayments on a $600,000 mortgage compared to 2025.

Current homeowners would be the most impacted in the short term by an anticipated hike, Canstar’s Sally Tindall says.

Tindall said another hike could be "the straw that breaks the camel’s back" for everyday Aussies.

"For new borrowers, who potentially might not have even been expecting any cash rate rises after last year's drops, they could have a wake-up call," she said.

Source: SBS

Australians with a larger mortgage debt will pay more over the lifetime of their mortgage.

A homeowner with $800,000 in debt would pay an additional $363 each month, and those with $1 million in debt would owe $453 more in monthly repayments.

— Cameron Carr, Alexandra Koster 

That will come today at 2.30pm AEST.

It’s expected the Reserve Bank will hand down its third rate rise this year after data from the ABS last week showed inflation had surged to an annual rate of 4.6 per cent in March, up from 3.7 per cent in February.

At 3.30pm, RBA governor Michele Bullock will speak a bit more about the decision. We'll bring that in when it's up.

— Alexandra Koster

Let's put it this way: it would be surprising if the RBA didn't raise the cash rate today.

Three quarters of panelists (75 per cent, or 27/36) from Finder's RBA cash rate survey expect rates to increase today to 4.35 per cent.

Sally Tindall from financial comparison site Canstar said today’s rate hike could be another "split decision".

"The last (RBA) board decision was split five to four. If one person around that board table last time around had a different view, we might've ended up with potentially a hold rather than a hike," Tindall said.

"I can only imagine it'll be yet another split decision that comes down to the wire because of these competing factors."

— Alexandra Koster, Cameron Carr

Good morning and welcome to the SBS News live blog for today's Reserve Bank rates announcement.

A quick recap of what we expect to see today:

• The Reserve Bank of Australia will release its Monetary Policy Decision Statement at 2.30pm AEST.
• The Monetary Policy Board met yesterday to discuss a potential rate increase. That meeting will continue this morning.
• All four big banks expect the RBA to hike rates later today.
• A 0.25 percentage point hike in May would result in higher monthly repayments of $91 on a $600,000 mortgage.

My colleague Cameron Carr wrote a useful explainer on what Australians can expect from today's announcement. You can read that here:

READ MORE

The RBA's rates call could 'come down to the wire'. This is what it means for you

Stay with us throughout the day. This blog will be updated as news comes to hand.

— David Smith