<div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><a href="http://9news.com.au/inflation" rel="" target="" title="Inflation"><span>Inflation</span></a><span> may have driven the decision but the </span><a href="http://9news.com.au/reserve-bank-australia" rel="" target="" title="Reserve Bank's"><span>Reserve Bank's</span></a><span> second consecutive </span><a href="http://9news.com.au/interest-rates" rel="" target="" title="rate hike"><span>rate hike</span></a><span> has also put talk of a recession back on the agenda.</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>Governor Michele Bullock didn't rule out the possibility yesterday afternoon, although she stressed that wasn't her goal. </span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>While she highlighted the likelihood the </span><a href="https://www.9news.com.au/israel-iran-conflict" rel="" target="" title="war in the Middle East"><span>war in the Middle East</span></a><span> would drive up prices due to fuel supply issues, a former RBA assistant governor flagged the escalating conflict as a "global recession risk".</span></div></div><div><div id="adspot-mobile-medium"></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><strong><span>AS IT HAPPENED:</span></strong><span> </span><a href="https://www.9news.com.au/national/rba-interest-rates-live-updates-march-2026-decision-latest-news-headlines/350491ae-9cc3-47b0-84f2-71cef3b2a650" rel="" target="" title=""><strong><span>RBA pulls trigger amid escalating conflict in the Middle East and high rate of inflation</span></strong></a></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>In the monetary board's statement after narrowly voting to lift the cash rate by 25 basis points to 4.1 per cent, it noted the war "poses substantial risks in both directions".</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>The board said it could drive up energy prices, pushing up inflation but those higher prices combined with "prolonged uncertainty" could eventually hit growth in Australia and its biggest trading partners.</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>"The best contribution we can make to full employment and in fact to things like investment and productivity and so on, is to have low and stable inflation," Bullock said yesterday.</span></div></div><div><div class="OUTBRAIN" data-reactroot="" data-src="//www.9news.com.au/national/rba-interest-rates-the-danger-on-the-flipside-of-the-rbas-rate-hike/0f884e4a-cc94-45b9-8ff4-98567d0cd712" data-widget-id="AR_5"></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>"So we do need to keep our eye focused on that ball.</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>"We don't want to have a recession, but if it's hard to get inflation down, then, you know, we're going to have to deal with that possibly."</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>Westpac Group chief economist Luci Ellis, who served as RBA assistant governor from 2016 to 2023, said the central bank's comments after hiking the cash rate focused on how an "extended period of high energy prices" could reduce supply and drive up inflation.</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><strong><span>READ MORE: </span></strong><a href="https://www.9news.com.au/national/australian-families-cost-of-living-fuel-and-interest-rate-hikes-hit-mortgage-holders/9dfdd7b0-be22-4af1-b04f-d50702c5b947"><strong><span>Average Aussie household almost $75 a week worse off than six weeks ago</span></strong></a><strong></strong></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>"Most other observers would see that scenario as a global recession risk with rather different policy implications," she said. </span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>"At the least, we struggle to imagine a scenario where the Strait of Hormuz remains closed for many months without sentiment and financial markets weakening considerably.</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>"The consequences for global growth in that scenario would be far from trivial, and not solely on the supply side.</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>"It is possible that the RBA's assessment of the implications of the Middle East conflict will evolve once it has done modelling of the impact."</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>Bullock said yesterday that the bank and probably the Treasury was looking into more advanced modelling of the conflict.</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>"We've done some modelling on sort of just very first-round pass-throughs of petrol price rises to inflation and - but we haven't done any modelling on potential impacts if the war goes on."</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><strong><span>READ MORE: </span></strong><a href="https://www.9news.com.au/world/us-israel-iran-war-israel-says-it-killed-two-top-iranian-officials-in-wartime-blow-to-countrys-leadership/884ed391-75ff-4735-ae7c-dccb0233cb05"><strong><span>Two more top Iranian officials killed, Israel says</span></strong></a><strong></strong></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>Oxford Economics modelling suggested the war had already added 0.3 percentage points to inflation in the first quarter of the year and could add another 0.75 percentage points in the next if oil stayed above $US100 ($141) a barrel.</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>"Against that backdrop, the RBA had little choice but to move again," head of economic research and global trade Harry Murphy Cruise said.</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>"Oil price shocks are a central bank's worst nightmare. The only thing that will bring oil prices down is more supply flowing through the Strait of Hormuz – and no amount of interest-rate hikes will convince Iran to reopen that passage. </span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>"Instead, the RBA must manage inflation (and inflation expectations) by slowing the rest of the economy. </span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>"That means dissuading spending on other goods to offset the inflationary impulse from higher fuel costs."</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><strong><span>READ MORE: </span></strong><a href="https://www.9news.com.au/national/lidcombe-news-two-men-charged-after-fatal-shooting-of-38yearold-man-in-sydneys-west/e60aa3c4-bafe-44ad-934e-9020c73e9733"><strong><span>Police hunt more men after two charged over fatal shooting in Sydney's west</span></strong></a><strong></strong></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>Commonwealth Bank of Australia head of Australian economics Belinda Allen praised the bank for hiking rates, saying the only question was "when, not if" to do so and predicting another hike in May.</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>But she also sounded a note of caution on growth.</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>"We expect the war to be months, not weeks long, and also expect energy prices to rise from here," she said.</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>"But so too could growth concerns, and the governor highlighted those risks several times in her press conference."</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>Chartered Accountants ANZ chief economist Professor Richard Holden said the board's decision to move now was both understandable and unsurprising.</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>"With global and domestic inflation moving up, but economic growth moving down, the RBA is in a bind," he said.</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><strong><span>READ MORE: </span></strong><a href="https://www.9news.com.au/national/crown-melbourne-cuts-200-jobs-amid-challenging-economic-conditions/d56b2fc3-623f-46f4-a5a9-891704ee4843"><strong><span>Crown Melbourne to cut 200 jobs amid 'challenging economic conditions'</span></strong></a><strong></strong></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>"To fight inflation, it needs to raise rates. To counter the challenges to economic growth, it needs to cut them. That sounds spookily like 1970s-style stagflation."</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>"It's true that the RBA and other central banks try to 'look through' temporary shocks to inflation. But this shock is potentially so big and long-lasting that it is hard to do that."</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>None of this is welcome news for Treasurer Jim Chalmers, who continues to list fighting inflation in his government's top three economic goals while attempting to ease the pain for voters with cost-of-living measures ahead of the May budget.</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>He was at pains to stress the RBA didn't point to government spending directly as an inflation driver but Bullock did say subsidies for costs such as energy prices could affect headline inflation, depending on their size.</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>Chalmers on last night told ABC's 7.30 that a recession was "not something that we're anticipating or forecasting or expecting".</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>"Inflation has moderated significantly from its peak, but it is higher than we would like, and conflict overseas has put upward pressure on global fuel prices," he said in a statement released earlier in the day.</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>"The duration of the conflict will be the primary determinant of how much pressure it adds to global inflation and how much it is a hit to growth."</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><strong><span>READ MORE: </span></strong><a href="https://www.9news.com.au/national/life-behind-bars-for-champagne-bottle-murder-in-hotel/d8eb08f5-efc1-4a12-913f-3dc56b3ba4bb"><strong><span>Man sentenced after murdering lawyer in hotel with champagne bottle</span></strong></a><strong></strong></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>9News chief political editor Charles Croucher said the four-five split on the RBA board would give the treasurer and borrowers hope of avoiding another rate rise in May.</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>"Donald Trump and the ruthless regime in Iran probably hold the key, and unfortunately, they won't be losing any sleep over Sydney mortgage holders tonight," he said yesterday.</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>"The government cannot control what's happening in the Middle East but the Reserve Bank noted that inflation was already too high before the war broke out. </span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>"That means the government must instead look to the budget. Jim Chalmers has nearly two months to publicly or privately or subtly or subliminally show the Reserve Bank that restraint will be the order of his budget."</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><strong><em><span>NEVER MISS A STORY:</span></em></strong><span> </span><strong><em><span>Get your breaking news and exclusive stories first by following us across all platforms.</span></em></strong></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><ul><li><strong><em><span>Download the 9NEWS App here via</span></em></strong><span> </span><a href="https://apps.apple.com/au/app/9news/id1010533727" target="_blank"><strong><em><span>Apple</span></em></strong></a><span> </span><strong><em><span>and</span></em></strong><span> </span><a href="https://play.google.com/store/apps/details?id=nineNewsAlerts.nine.com&amp;hl=en_AU&amp;pli=1" target="_blank"><strong><em><span>Google Play</span></em></strong></a></li><li><strong><em><span>Make 9News your preferred source on Google by</span></em></strong><span> </span><a href="https://9.nine.com.au/8x987w" target="_blank"><strong><em><span>ticking this box here</span></em></strong></a></li><li><strong><em><span>Sign up to</span></em></strong><span> </span><a href="https://login.nine.com.au/edm?client_id=nineatnine" target="_blank"><strong><em><span>our breaking newsletter here</span></em></strong></a></li></ul></div></div>