The Australian Central Bank raised its benchmark cash rate by 25 basis points to 4.85% on Tuesday, the highest level since November 2008.

The move by the Reserve Bank of Australia is in line with the expectations of economists surveyed by Reuters, and it marks the fifth interest rate hike this year.

Meanwhile, Australia is still dealing with high inflation. In September, the consumer price index rose by 4.3% year-on-year, higher than 4% in August, and reached its highest level since March.

In the September interest rate decision, Reserve Bank of Australia Governor Michelle Bock stated that inflation was "too high," with reasons including the Iran war driving up oil prices and stronger domestic spending.

She added, "We see that the risks of rising inflation are becoming apparent, and if it is necessary to bring inflation down, we will raise interest rates further."

The Australian economy slowed down in the first two quarters of 2026. On an annual basis, Australia's GDP growth in June was 2.1%, lower than the 2.5% in March.

The Reserve Bank of Australia is trying to control inflation while also addressing the impact of higher borrowing costs and rising living expenses on households and economic activity.

When asked whether he believes Australia will fall into recession, Bloch stated that this "is not our baseline scenario at present."

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