Minutes from the Reserve Bank of Australia’s September meeting showed that policymakers voted unanimously to raise the cash rate by 25bps to 4.6%, citing persistent upside risks to inflation. Several threats highlighted in August had since materialised, including Middle East tensions pushing oil prices above earlier forecasts, renewed global cost pressures partly linked to AI-related demand, and stronger-than-expected domestic activity.
Recent inflation data exceeded expectations, and businesses reported broad-based cost pass-through to consumers. Short-term inflation expectations remained elevated, heightening concerns that medium-term expectations could drift higher. While labour market conditions eased broadly in line with earlier projections, underlying demand stayed solid and capacity constraints appeared more pronounced than previously assessed.
Members cautioned that delaying further tightening risked entrenching inflation after an extended period above the target band. They also observed that leaving the policy rate unchanged could put downward pressure on the Australian dollar at a time when other major central banks were continuing to tighten. The Board reaffirmed that its primary objective is to return inflation to target, with current projections indicating a return to the midpoint of the band by around mid-2027.
