Australia raises interest rate to 4.85% as AI spending and energy costs fuel inflation
RBA raises rate 25 basis points to 4.85% in a 6-3 vote
Australia's central bank raised its interest rate by 25 basis points to 4.85% on Tuesday, its highest level in 18 years. The Reserve Bank of Australia (RBA) pointed to rising technology costs from AI investment and higher energy prices.
The RBA's monetary policy board voted 6-3 for the increase, with three members preferring to hold the rate at 4.60%. The bank also warned that inflation would stay elevated through much of 2027.
The RBA pushed back its forecast for inflation to return to the top of its 2% to 3% target range until late 2027. That is around three quarters later than previously expected.
Key numbers
- New benchmark rate: 4.85%, up 25 basis points.
- Board vote: 6-3, with a minority wanting 4.60%.
- Highest Australian rate in 18 years.
- Inflation forecast to reach the top of the 2%-3% target band: late 2027, about three quarters later than the earlier forecast.
What the RBA board said
According to the board, AI-related investment is driving rapid growth in prices for technology-related goods. The bank also cited higher fuel and commodity prices affected by the Middle East conflict.
How this compares with the US Fed
The increase contrasts with the US Federal Reserve's decision to hold rates last week. Fed officials have also warned that the AI investment boom is adding to price pressures, including for computer equipment and utilities.
Treasurer's response
Australian Treasurer Jim Chalmers said the decision was widely expected but still difficult for households and businesses. In his words: "It's difficult news for many Australians who are already paying a hefty price for circumstances outside their control."
What is confirmed
- The RBA raised the benchmark rate to 4.85% on Nov. 3, 2026, in a 6-3 vote.
- The board tied the rise to AI-related technology price growth plus energy and commodity costs.
- The inflation forecast moved to late 2027.
- The Fed held rates the week before.
Sources
Newisty Editorial Team covers technology, cryptocurrency, digital products, online platforms, developer tools and the wider digital economy. Our content is researched from official sources, company announcements, public documentation, market data and other primary or reputable sources. Articles are reviewed and edited before publication for clarity, accuracy and useful context.