At 2:30pm AEST, the S&P/ASX 200 Index (ASX: XJO) was up 0.1% at 8,687.5 points as investors awaited today's interest rate decision.
Then the Reserve Bank of Australia (RBA) released that rate decision, and the ASX 200 promptly dropped 0.2% to 8,668.3 points.
With concerns over persistently high inflation rising, market expectations of an RBA interest rate increase had jumped to 92% prior to today's announcement, according to the ASX's RBA rate tracker.
And the market's expectations proved to be spot on.
At its meeting today, the RBA board decided to increase the cash rate target by 0.25% to the new 4.60%.
This marks the fourth interest rate hike by Australia's central bank this year. And it sees Australia's official cash rate at the highest levels since October 2011.
When Aussies turned over the calendar onto 2026, the rate stood at 3.60%. And most analysts were forecasting rate cuts ahead.
Here's why that's not happening.
Image source: Getty Images
ASX 200 wobbles as RBA boosts interest rates again
Commenting on today's decision, the RBA noted, "Inflation remains elevated and some of the upside risks flagged in August are materialising."
And ASX 200 investors look to have both the fallout from the Iran war and the ongoing AI boom to thank for today's interest rate boost.
According to the RBA:
The conflict in the Middle East has broadened and global energy prices are now much higher than had been assumed in the August forecasts. AI-related demand is driving rapid growth in global prices for technology-related goods.
As far as the domestic economy is going, the central bank cited "heightened" uncertainties about the outlook for Australia's economic activity and inflation.
The RBA noted:
There are signs that growth in consumer spending is easing gradually as expected, although housing prices have fallen in most capital cities and new housing loans have declined noticeably. Labour market conditions have eased broadly as expected in recent months, and labour market leading indicators are broadly stable. Meanwhile, growth in business investment and debt is strong.
The board's decision to lift interest rates today was unanimous.
What are the experts saying?
Commenting on today's RBA interest rate decision that's pressuring the ASX 200, Ronak Bhimjiani, real estate economist at JLL Australia, said, "While largely anticipated by markets, the move reflects a Board increasingly focused on persistent underlying inflation and stronger-than-expected economic growth."
Bhimjiani added:
For real assets, higher borrowing costs will continue to sharpen investor discipline, with pricing and underwriting assumptions likely to remain conservative in the near term.
However, income resilience remains a defining theme. With inflation still tracking above the RBA's target band, rental growth continues to provide a natural buffer, helping preserve real returns and supporting the appeal of well-leased assets relative to other investment classes.
