Reserve Bank of Australia delivers third straight interest rate hike

(Sharecast News) - The Reserve Bank of Australia delivered a third consecutive interest rate increase as it moved to contain mounting inflationary pressures tied to higher fuel costs, while warning that the war involving Iran would deal a significant blow to the economy.

The widely expected decision lifted the RBA's cash rate to 4.35% from 4.1%, and came alongside a downbeat set of forecasts pointing to intensifying cost‑of‑living pressures and weaker growth.

The RBA said the fallout from the US‑Israel conflict with Iran would cut around half a percentage point from its 2026 GDP projections, compared to pre‑war projections, with annual growth halving to 1.3% this year.

The Australia central bank noted that the oil‑driven supply shock would push inflation to a higher peak, with consumer prices now expected to rise 4.8% in the year to the June quarter, versus a pre‑war estimate of 4.2%. It added that inflation was likely to remain elevated even if the conflict ended soon, warning that many firms facing cost pressures were looking to raise prices.

"There are early signs that many firms experiencing cost pressures are looking to increase prices of their goods and services," the RBA said. "In light of these considerations, the board assessed that inflation is likely to remain above target for some time."

Reporting by Iain Gilbert at Sharecast.com