Australia’s central bank raised its benchmark rate by a quarter-point to a 12-year high, ending a four-session long pause, as inflation is likely to be more persistent than estimated though policymakers suggested that any further tightening is off the table.<\/p>\n
The policy board of the Reserve Bank of Australia, headed by Governor Michele Bullock, decided to lift the cash rate target by 25 basis points to 4.35 percent. <\/p>\n
The RBA also increased the interest rate paid on exchange settlement balances by 25 basis points to 4.25 percent.<\/p>\n
The central bank had held interest rates steady since June following an increase of 4 percentage points since May last year. The current 4.35 percent is the highest since late 2011.<\/p>\n
The latest raise was the first change since Bullock took office as governor in September.<\/p>\n
“The Board judged an increase in interest rates was warranted today to be more assured that inflation would return to target in a reasonable timeframe,” Bullock said. <\/p>\n
Although inflation has passed its peak, it is still too high and is proving more persistent than expected a few months ago, the bank noted. <\/p>\n
Information available since the August meeting suggested that the risk of inflation remaining higher for longer has increased, the bank said. <\/p>\n
Inflation is forecast to be around 3.5 percent by the end of 2024 and at the top of the target range of 2-3 percent by the end of 2025.<\/p>\n
The labor market conditions eased but they remain tight and housing prices continued to increase across the country. These factors added to the risks to inflation remaining higher for longer. <\/p>\n
The RBA today downgraded its unemployment rate forecast saying the rate will rise gradually to around 4.25 percent. <\/p>\n