Australia's central bank raises rates to 4.1%, highest since April 2025, as inflation persists above target. The Reserve Bank of Australia approved a 25 basis point hike in a narrow 5-4 vote, citing sticky inflation at 3.6% and geopolitical risks from Middle East tensions threatening further price increases. RBA expects inflation to remain elevated for some time, with upside risks now dominating. Domestic factors including a tight labor market and positive output gap drove the decision. Deputy Governor Andrew Hauser warned the bank has a serious inflation problem, with expectations for prices to return to the 2-3% target range by late 2026 or 2027. The close vote reflects internal debate about the pace of tightening amid uncertain global conditions.
