Australia's central bank raised its key interest rate by a quarter point to 4.6 percent on Tuesday, September 29, the highest level in 15 years and the fourth increase of 2026.

The Reserve Bank of Australia pointed to two forces driving inflation. The prolonged conflict in the Middle East has disrupted global oil supplies and pushed up energy prices. And the boom in artificial intelligence is driving heavy spending on data centers, which raises demand for workers and materials.

“The Middle East conflict has been a big shock and it has made us all poorer in this country,” Governor Michele Bullock said. Treasurer Jim Chalmers said Australia's inflation challenge is being turbocharged by a war on the other side of the world.

The increase raises mortgage costs for Australian households already under pressure from the cost of living. Home prices have fallen in most major cities, and new home lending has dropped noticeably.

The same pressures are being felt worldwide: the U.S. Federal Reserve raised rates in September, and fuel prices have hit record highs in Europe.