The Reserve Bank of Australia raised its benchmark interest rate by 25 basis points to 4.85% on Tuesday, taking borrowing costs to their highest level in 18 years. The central bank said inflation is now expected to remain elevated through much of 2027, with the return to the top of its 2% to 3% target range pushed back until late 2027, about three quarters later than previously forecast.
According to the bank’s monetary policy board, AI-related investment is driving rapid price growth in technology-linked goods. It also pointed to higher fuel and commodity prices tied to the Middle East conflict as added sources of inflation pressure. The rate decision passed on a 6–3 vote, while three members preferred to leave the benchmark rate unchanged at 4.60%.
Australian Treasurer Jim Chalmers said the move had been widely expected, but called it difficult news for households and businesses already under strain. The decision also stood in contrast to the US Federal Reserve, which held rates steady last week even as its officials warned that the AI investment boom was lifting costs for items such as computer equipment and utilities.
The Reserve Bank of Australia raised its benchmark rate by 25 basis points to 4.85% on Tuesday, saying inflation will stay elevated through much of 2027 as higher energy costs and AI-linked investment add to price pressures.
Rate reaches an 18-year high
The central bank’s monetary policy board voted 6–3 in favor of the increase. Three members preferred to keep the rate unchanged at 4.60%.
With the move, Australia’s interest rate has climbed to its highest level in 18 years. The bank also pushed back its timeline for inflation to return to the top of its 2% to 3% target range until late 2027, around three quarters later than it had previously expected.
RBA points to AI investment and energy costs
The board said, 「AI-related investment is driving rapid growth in prices for technology-related goods,」 while also citing higher fuel and commodity prices affected by the Middle East conflict.
Australian Treasurer Jim Chalmers said, 「Today’s decision by the RBA was widely expected, but that doesn’t make it any easier for families and businesses. It’s difficult news for many Australians who are already paying a hefty price for circumstances outside their control.」
Contrast with the Federal Reserve
The increase stands in contrast to the US Federal Reserve’s decision last week to leave rates unchanged. Even so, Fed officials have also warned that the AI investment boom is adding to price pressures, including for computer equipment and utilities.
Cointelegraph also linked the development to its related coverage that the Fed’s hawkish rate hold continues to keep pressure on Bitcoin.
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