RBA Decision – September 2026

September 2026

The Reserve Bank of Australia (RBA) Board decided to increase the cash rate by 25 basis points to 4.60% at its September meeting, ending a two-meeting pause. This is the fourth increase of 2026 and takes the cash rate to its highest level since late 2011.

The move was in line with expectations. Markets were pricing a 92% chance of a hike, up from a 44% chance only one month ago, showing how quickly expectations have changed. Hawkish commentary from Governor Bullock and senior RBA officials throughout September, including the Governor’s remarks that higher unemployment is needed to rein in inflation, shifted consensus expectations firmly towards a hike.

This decision also follows a rate hike at the US Federal Reserve’s September meeting, where expectations have also shifted from rate cuts to hikes over the next few months.

Key changes from the August statement were as follows:

• The Board stated that some of the upside risks to inflation that were flagged in August are now materialising. The Middle East conflict has broadened, global energy prices are much higher than assumed in the August forecasts and recent domestic inflation outcomes were stronger than expected. Fuel price pass-through to other goods and services has moved from being indicated to partially occurring.  The Board also added a new source of pressure, noting that AI-related demand is driving rapid growth in global prices for technology-related goods.
  
• There was less concern about the labour market, with the Board noting that conditions have eased broadly as expected in recent months, compared with easing by a little more than expected in August, and that leading indicators are now broadly stable
  
• The Board noted that output growth has slowed but was stronger than expected at the margin in the June quarter, with consumer spending easing gradually. Business investment and debt growth remain strong.  The Board remains focused on ensuring that high inflation does not become embedded, and noted that to achieve this, growth in aggregate demand needs to remain subdued for a period to reduce capacity pressures and bring inflation back to target.
  
• There was greater concern about housing, with prices now falling in most capital cities and a new flag on uncertainty around the economic effects of the housing downturn. It is rare for the RBA to hike rates while knowingly in a housing downturn, highlighting how focused the Board is on bringing inflation down.

The Board no longer characterised its policy stance as somewhat restrictive, instead judging that a further tightening in financial conditions is warranted, and left the door open for additional rate hikes. The statement noted that today’s decision was unanimous, in line with the August result.

Following the announcement, Australian government bond yields were flat, the AUD/USD rose, and Australian equities fell, although market reactions were small given that the hike was widely expected.  er), the AUD/USD rose, and Australian equities moved higher, with investors hopeful the RBA remains patient from here. 

This information is general advice and does not take account of investors’ objectives, financial situation or needs. Before acting on this general advice, investors should therefore consider the appropriateness of the advice having regard to their objectives, financial situation or needs.