Australia's central bank raised its policy rate to 4.35% on Tuesday, matching December 2024 peaks as inflation pressures persist. The Reserve Bank of Australia voted eight to one for the hike, marking its third consecutive increase. Inflation picked up materially in the second half of 2025, driven partly by Middle East conflict pushing fuel and commodity prices higher. The RBA projects inflation will remain above its 2% to 3% target for some time, with risks elevated. Forecasts were upgraded to 4.8% for June and 4% for 2026. The central bank signaled more hikes ahead, with projections showing a 4.7% rate by December 2026. Economic growth was revised down to 1.3% from 1.8%, though the economy expanded 2.6% year-over-year in Q4, beating expectations. Market analysts noted the RBA's hawkish tone leaves little room for a pause in June, keeping rate increase options open.
