Monetary Policy Decision

Media Conference – 3 february 2026

Decision
The cash rate target increased by 25 basis points to 3.85 per cent. The policy decision was unanimous.

Inflation
Inflation has eased significantly since 2022 but has recently risen materially, with the Board viewing part of the increase as a reflection of greater capacity pressures, indicating stronger momentum in demand from both consumers and businesses in recent months. As a result, the Board assesses that inflation is likely to remain above the target for some time.

Economic and Labour Market Conditions
Growth in private demand has strengthened substantially more than expected. This has been driven by both household spending and business investment, supported by readily available credit. Activity and prices in the housing market are also continuing to pick up. The effects of earlier interest rate reductions have yet to fully flow through to demand, prices and wages. Labour market conditions remain a little tight, with strong wage growth and high growth in unit labour costs. Uncertainty persists regarding the outlook for inflation and domestic economic activity. Global economic uncertainty remains elevated, but so far it has had no depressing impact on growth and trade among Australia’s major trading partners.

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