Australia central bank hikes rates to a near 1-year high as Iran war raises inflation risks

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Australia’s central bank on Tuesday raised benchmark policy rates for a second straight time, pushing them to their highest since April 2025 at 4.1%, amid sticky inflation.

The 25 basis points hike was in line with expectations from analysts polled by Reuters, and comes as Australia’s inflation stays above the central bank’s upper limit of 3%, with the war in the Middle East risking a further rise in prices.

“While inflation has fallen substantially since its peak in 2022, it picked up materially in the second half of 2025,” the Reserve Bank of Australia said in its statement.

While developments in the Middle East remain highly uncertain, the RBA also said, they are likely to add to global and domestic inflation. The bank added that inflation was likely to remain above target for “some time” and that the risks have tilted further to the upside, warranting the rate hike.