The Reserve Bank of Australia has raised its official cash rate by 25 basis points to 4.35%, marking the third rate hike this year as the central bank grapples with mounting inflation pressures. The decision was widely anticipated by markets and reflects growing concerns about the economic impact of ongoing Middle Eastern conflicts on commodity prices and broader inflationary trends.

The RBA cited material pickup in inflation during the second half of 2025, with recent data confirming that capacity pressures are contributing to price increases across the economy. The bank specifically highlighted how the Middle East conflict has driven sharply higher fuel and related commodity prices, which are already feeding through to broader inflation measures. Early indicators suggest many firms facing cost pressures are preparing to pass these increases onto consumers through higher prices for goods and services.