Unless there is more moderation in inflation, the Reserve Bank of Australia (RBA) may again raise rates, minutes from the central bank's early February policy meeting reveal.

The RBA raised its key policy rate to 3.85% from 3.60% at the Feb. 2-3 session, citing rising and stubborn inflation and tight labor markets, among other factors. The rate hike was a reversal and marked the first increase in the policy rate since November 2023, and came after rates had been cut from an apex of 4.35% in 2024 and early 2025.

The RBA has a target inflation band of 2% to 3% on the nation's consumer price index (CPI).

But Australia most recently logged an inflation rate of 3.8% in December of 2025, which was up from a recent nadir of 1.9% in June of last year, according to the Australian Bureau of Statistics (ABS).

In their February meeting, Australia's central bankers were concerned that inflation was not cooling from post-pandemic highs, and indeed was gaining strength.

"Members noted that inflation had picked up in the second half of 2025 and was currently too high. While the increase in underlying inflation was at odds with the central projection six months prior, it represented the crystallization of what had been a growing risk highlighted by the Board, most recently at the December meeting," recorded the minutes.

Regarding the nation's labor markets, the central bankers found that "there had been ongoing strength in unit labor costs, the unemployment rate had been lower than expected and measures of underemployment were historically low. The staff's overall assessment was that the labor market was a little tighter than consistent with full employment."

In the February session, the RBA forecast the nation's headline inflation would strike near 4.2% in mid-2026 and would not fall into the 2% to 3% target band until mid-2027.

The next RBA policy session is slated for March 16-17.

Despite the outlook for above-target inflation, the Australian Securities Exchange's RBA Rate Tracker on Feb. 16 placed the odds of a rate hike at the pending RBA meeting at 9%, with a 91% chance the central bank will stand pat.