RBA Raises Cash Rate 25 bps to 4.35% in Third Hike

The Reserve Bank of Australia raised its cash rate by 25 basis points to 4.35 percent on Tuesday, marking the third consecutive increase as policymakers combat persistent inflation partly fueled by the Middle East conflict.

The decision unwinds rate cuts from last year and returns the benchmark to pre-easing levels. Inflation accelerated to 4.6 percent year-on-year in March, the highest in over two years, driven by a 32.8 percent surge in petrol prices amid elevated oil costs from the conflict, including disruptions near the Strait of Hormuz. The trimmed mean inflation measure, which excludes volatile items, stood at 3.3 percent, remaining above the central bank's 2 to 3 percent target.

RBA Governor Michele Bullock acknowledged the strain on households during a post-decision press conference. "Australians were feeling poorer," she said, but emphasized the hike provides "space" to evaluate global and domestic conditions. Officials noted a broadly stable labor market and risks of unanchored inflation expectations without further action.

Australia's four largest banks quickly passed the increase to variable-rate mortgage customers, affecting millions of borrowers over the coming...