FX.co ★ RBA Lifts Rates for Second Month Amid Inflation Pressures

The Reserve Bank of Australia raised its cash rate by 25 basis points to 4.1% at its March 2026 meeting, following a hike in February and in line with market expectations. In a split decision, the board responded to a broad range of data indicating renewed inflationary pressures in the second half of 2025. Although some of this pickup is viewed as temporary, the board pointed to a modest tightening in the labour market and stronger-than-previously-assessed capacity constraints. Elevated uncertainty surrounding the conflict in the Middle East was also cited as a factor that could amplify both global and domestic inflation risks. In this context, the RBA expects inflation to stay above target for an extended period, with risks tilted to the upside, including via inflation expectations, thereby justifying the latest rate increase. Policymakers reiterated that decisions will remain data-dependent, with close monitoring of global and financial conditions, domestic demand, and labour market developments. They underscored that policy will remain flexible and ready to adjust as needed, with a continued priority on price stability and full employment.