Monetary Policy Decision

Media Conference – 17 MARCH 2026

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Decision
The cash rate target increased by 25 basis points to 4.1 per cent. Today’s policy decision was made by majority: five members voted for an increase, while four voted to keep it unchanged at 3.85 per cent.

Inflation
Inflation has eased significantly since 2022 but has recently risen materially, with the Board interpreting part of this rise as reflecting greater capacity pressures in meeting private demand. In addition, the conflict between the United States and the Middle East has pushed fuel prices sharply higher. Should these prices remain elevated, they are likely to contribute further to inflation. As a result, the Board concludes that inflation faces a material risk of staying above target longer than previously anticipated.

Economic and Labour Market Conditions
Private demand strengthened significantly more than expected in mid-2025, though its composition surprised in the December quarter, with business investment exceeding expectations and household consumption below expectations. Activity and prices in the housing market grew strongly over the past year, although price growth slowed somewhat at the start of 2026. The effects of earlier interest rate reductions have yet to fully flow through to demand, prices and wages. Labour market conditions remain slightly tight. Meanwhile, growth in unit labour costs has declined.

Monetary Policy Stance
Recent inflation data suggest that risks to inflation have tilted further to the upside. The Board judged that inflation would likely stay above target for a while and decided that raising the cash rate target was appropriate.