Australia’s central bank raised interest rates again on Tuesday, lifting the cash rate to 4.35% as policymakers warned that inflation could remain above target for an extended period.

The Reserve Bank of Australia’s (RBA) move matched expectations in a Reuters poll and marked its third consecutive increase. The decision was not unanimous: eight board members voted for the hike and one voted to hold.

In its statement, the RBA said inflation picked up materially in the second half of 2025 and highlighted the impact of Middle East conflict dynamics on global energy and commodity prices. Higher fuel costs are already feeding into headline inflation and the bank said there were signs of “second-round” effects spreading into broader goods and services pricing.

The RBA reiterated that inflation is likely to remain above its 2% to 3% target for some time and that the balance of risks remains skewed to the upside.

Updated projections in the bank’s Statement on Monetary Policy pointed to a potentially higher terminal rate. The RBA’s forecasts penciled in a 4.7% policy rate by December 2026 — 50 basis points above the projection published in early February — implying that further tightening remains on the table if inflation proves more persistent.

The central bank also upgraded its inflation outlook and trimmed growth expectations. Forecast inflation was lifted to 4.8% for the June quarter and 4% for the year ending 2026, while 2026 economic growth was revised down to 1.3%.

Economists said the tone was notably hawkish. ANZ, in a post-meeting note, said the RBA appeared focused on keeping options open rather than signaling a near-term pause.

For markets, the decision matters beyond Australia. A higher-for-longer stance among developed-market central banks can tighten global financial conditions, influencing bank funding costs, equity risk appetite and currency moves — particularly if energy-driven inflation remains sticky.