At its meeting this morning, Tuesday, February 3, the RBA Board of Governors unanimously voted to raise the policy rate by 25 basis points to 3.85%, as expected. This is the first rate hike since November 2023, as inflation continues to rise.

In its policy statement, the RBA noted that inflation, after declining significantly from its peak in 2022, rose sharply in the second half of 2025. The bank believes that part of this rise reflects pressures on production capacity and expects inflation to remain elevated for some time.

Indications suggest that labor market conditions remain somewhat tense, although they have stabilized in recent months in line with the recovery in economic activity. There is still considerable uncertainty surrounding the outlook for domestic economic activity and inflation.

The Board will pay close attention to data and evolving assessments of the outlook and risks to guide its decisions. It will focus on its mandate of achieving price stability and full employment and will take whatever measures are necessary to achieve this goal.