Australia's Central Bank Hikes Interest Rates for First Time in Over Two Years Amid Rising Inflation

Kathmandu. To control rising inflation, the Central Bank of Australia has increased interest rates for the first time in over two years.

The Central Bank of Australia announced in its first monetary policy meeting of 2026 that it unanimously decided to raise the cash interest rate from 3.60 percent to 3.85 percent.

This decision marks the first interest rate hike since November 2023. Previously, in 2025, the bank had reduced the interest rate three times, totaling a decrease of 0.25 percent.

According to the central bank's monetary policy committee, although inflation, which reached a high point in 2022, has significantly decreased since then, it has sharply increased again in the second half of 2025.

According to the latest data released by the Australian Bureau of Statistics, the Consumer Price Index increased by 3.8 percent in the twelve months leading up to December 2025, which is higher than the previous month's 3.4 percent. The underlying inflation rate, which the central bank considers a key indicator, also reached 3.3 percent in December, up from 3.2 percent the previous month.

The monetary policy committee indicated that inflation is likely to remain above the target range of 2 to 3 percent for some time. According to the committee, private sector demand is growing faster than expected, pressure on production capacity has increased, and the labor market is also somewhat tight.

According to the updated forecast released by the central bank, the annual inflation rate is expected to reach 4.2 percent by mid-2026. Thereafter, inflation is projected to fall to 2.9 percent by mid-2027.