Sydney Opera House Sydney, Latest South Wales, Australia.
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In a surprise move, the Australian central bank raised the interest rate by 25 basis points and opened the door to more hikes – resuming the cycle of monetary policy tightening after a break at the previous meeting.
The Reserve Bank of Australia increased by 25 basis points to 3.85%, contrary to market expectations. Economists polled by Reuters widely expected the central bank to hold interest rates at 3.6% for a second consecutive meeting.
The australian dollar it strengthened even further in the Tuesday afternoon session, rising 0.84% to 0.6687 against the US dollar. Reference S&P/ASX200 fell by 0.9%.
performance on 10-year Australian government bond shortly after the decision it amounted to 3.472%.
The central bank stressed nationwide inflation rate 7% it was still too high.
“While recent data showed a welcome fall in inflation, the central forecast stays that it’ll take several years for inflation to return to the top of its goal range,” the RBA said in an announcement.
The central bank forecasts that inflation for the whole of 2023 will amount to 4.5%.
The RBA also left the door open to further rate hikes to bring inflation down to the 2% to 3% goal.
“Further monetary policy tightening could also be vital to ensure inflation returns to goal inside an affordable timeframe, but this may rely upon economic and inflation developments,” it said.
“The board stays firm in its determination to bring inflation back to goal and can do whatever is vital to achieve this,” it said.