SYDNEY, Sept. 29 (Xinhua) -- Australia's central bank on Tuesday raised interest rates to a 15-year high, citing inflation driven by AI and the conflict in the Middle East.
The Reserve Bank of Australia (RBA) said its Monetary Policy Board voted unanimously to lift the cash rate target from 4.35 percent to 4.60 percent, the highest figure since November 2011.
It marks the fourth rate rise delivered by the RBA so far in 2026 after three previous increases of 0.25 percentage points in February, March and May.
Economists and Australia's major banks had unanimously predicted the decision to raise the cash rate target on Tuesday.
The Monetary Policy Board said in its decision statement that the conflict in the Middle East has broadened, causing global energy prices to rise much higher than assumed when the board decided to keep interest rates on hold in August.
"The Middle East conflict remains unresolved, and there are scenarios where inflation is higher and activity lower than forecast. Global oil supply disruptions are maintaining upward pressure on global and domestic energy prices and inflation," it said.
Additionally, it said that AI-related demand is driving rapid growth in global prices for technology-related goods.
Speaking earlier on Tuesday, Treasurer Jim Chalmers said that the conflict in the Middle East has been "absolutely disastrous" from a cost-of-living and economic perspective.
"We're seeing inflation going up around the world; we're seeing interest rates going up around the world. And unfortunately, Australia's not immune from the same pressures," he told Australian Broadcasting Corporation (ABC) radio.
After the decision was handed down, Chalmers told reporters that the conflict is not the only factor in Australia's inflation challenge, but it is a very big factor and has made high inflation linger for longer.
The latest data from the Australian Bureau of Statistics showed that annual inflation fell from 3.8 percent in June to 3.5 percent in July.
The trimmed mean, the measure of underlying inflation preferred by the RBA, remained steady at 3.6 percent. The central bank targets annual inflation of 2-3 percent.
The statistics bureau will release inflation data for August on Wednesday, and the Monetary Policy Board will next meet at the start of November.
The board said in its decision statement on Tuesday that it will continue to do what it considers necessary to bring inflation sustainably back to target, including further increasing the cash rate target.
RBA Governor and Monetary Policy Board Chair Michele Bullock said at a media conference following Tuesday's meeting that the full effects from the rate rises in the first half of 2026 have not yet flowed through the economy.
"We raised interest rates three times earlier in the year. A lot of that effect is still to flow through. This is one more. What we are predicting here is that this will be restrictive enough," she said.
David Bassanese, chief economist at Sydney-based fund manager Betashares, told the ABC that he expects the central bank to lift rates by another 0.25 percentage points in November, warning that the Australian economy is set for a period of stagflationary conditions. ■
