The Cash Rate Went Up. What Do Those Words Mean?

A rise of 25 basis points means the cash rate target went up by a quarter of one percentage point. It does not mean the rate went up by a quarter of itself.

General education only. Not financial advice. This explains what was announced and what the words mean. It does not forecast rates, and it does not say what the change means for your loan or your savings.

On 29 September 2026, the Reserve Bank of Australia’s Monetary Policy Board announced it had decided to increase the cash rate target by 25 basis points. The change took effect on 30 September. The Board’s statement gave its reason in one line: inflation remains elevated and some of the upside risks flagged in August are materialising.

That one sentence carries four pieces of finance vocabulary, and it is fair if it washed straight past you. Each of them has a plain meaning.

What happened

The decision was made at the Board’s September 2026 meeting, one of eight it holds a year. The Board works to a target for inflation set in the Statement on the Conduct of Monetary Policy: consumer price inflation between 2 and 3 per cent.

The day after the announcement, on 30 September 2026, the Australian Bureau of Statistics released its monthly Consumer Price Index. It put prices 4.0 per cent higher in the 12 months to August 2026, up from 3.5 per cent in the 12 months to July.

The words

• Cash rate. The interest rate that banks pay to borrow funds from other banks in the money market overnight, in the Reserve Bank’s definition. Few households borrow at it. It matters because of what it moves.
• Target. The Board sets a target for the cash rate, and that is the number in the announcement. The current target is on the Reserve Bank’s cash rate page.
• Basis point. One hundredth of one percentage point. So 25 basis points is a quarter of a percentage point, and 100 basis points is one full percentage point.
• Monetary Policy Board. The nine-member board inside the Reserve Bank that has made the cash rate decision since 1 March 2025: the Governor, the Deputy Governor, the Secretary to the Treasury, and six non-executive members appointed by the Treasurer.
• Pass-through. How much of a cash rate change ends up in the rates households pay and earn. The Reserve Bank says it is high in Australia, because most deposits and loans are at variable or short-term fixed rates.

Who it reaches, and how

The announcement changes one rate. The rates on loans and savings accounts are set by lenders.

• A variable rate can move when the lender decides to move it. ASIC’s Moneysmart says your lender decides whether to change the rate and by how much, and the Reserve Bank says banks’ funding costs do not necessarily move by the same amount or at the same speed.
• A fixed rate does not move during its fixed period. In Moneysmart’s words, your repayments will not change, even if market interest rates rise or fall.
• A repayment can change on a different day from the rate. For regulated consumer credit, a lender must tell you about a change to your repayments no later than 20 days before it takes effect.
• A savings rate sits on the same mechanism, since the Reserve Bank’s point about pass-through covers deposit rates as well as lending rates.

What any one lender does will be in its own notice.

Why the Reserve Bank gets to do this

The Board’s power over the cash rate has a history, and so does its habit of announcing decisions at all. Before January 1990, the Reserve Bank did not announce the level it wanted the cash rate to be. The long version, from the Bank’s first day in 1960 to the board that sets the rate now, is in Who Sets Interest Rates in Australia.