Australia's Central Bank Leaves Door Open to a Fifth Rate Hike

By James Glynn

SYDNEY--The Reserve Bank of Australia has left open the prospect of raising interest rates further, warning that several upside risks to inflation it identified earlier were materializing.

The board will continue to do what it considered necessary to achieve low inflation, "including increasing the cash rate target further if required," the bank said in minutes of its September policy meeting released Tuesday.

The comments suggest the official cash rate could be raised a fifth time this year in November, with many economists concerned that the coming inflation data for the third quarter will confirm that policy settings are not tight enough.

"The strongest argument for raising the cash rate target at this meeting was that several of the upside risks identified in August had since materialized or were building," the minutes said.

Inflation has remained elevated above the RBA's target of 2.5% for some time, and recent comments from senior bank officials suggest it has run of patience.

"Members acknowledged that the trade-off between inflation and full employment had deteriorated because of global cost pressures," the minutes said.

A further rise in interest rates threatens to raise mortgage repayments as a percentage of household income to its highest level since the late 1980s, according to some estimates.

Rising interest rates, soaring fuel costs, and fears about long-term geopolitical instability have seen consumer confidence levels slump in recent months.

"International developments added to the view that upside risks to the inflation forecast had materialized. The Middle East conflict had escalated and oil prices were substantially above the level assumed in the August forecasts," the RBA said.

Write to James Glynn at james.glynn@wsj.com

(END) Dow Jones Newswires

October 12, 2026 21:25 ET (01:25 GMT)