RBA hikes interest rate to 4.85%, but a split vote hints the end may be near

What happened

The Reserve Bank of Australia raised its cash rate by 25 basis points to 4.85% in a 6–3 vote, with three members preferring to hold steady. The majority said further tightening was warranted to bring inflation back to target.

Confirmed

Global impact / market context

Higher rates raise borrowing costs for households and businesses, which can shrink spending, slow hiring and soften company revenue. The split vote signals the tightening cycle may be near its end, which changes how investors weigh future rate moves.

Analyst inference

Underlying inflation of 3.7% a year is well above the central bank's forecast path, so rate-cut hopes look premature. Money markets had priced about an 80% chance of this hike, meaning the decision was widely expected rather than a surprise.

Analyst inference

What to watch

1. The RBA said it will remain attentive to the data and that policy is well placed to respond, so upcoming inflation and jobs reports will shape whether another rate rise follows. Confirmed
2. Watch whether the three members who preferred to hold gain support, since a higher bar for a sixth hike could mean the cash rate stays at 4.85% for longer. Proposed
3. Track Australian bank funding costs and mortgage rates, because a sustained cash rate near 4.85% can squeeze household cash available and reduce loan demand. Analyst inference

Evidence

• marketindex.com.au