Australia raises rates for first time since late 2023 as inflation hits six-quarter high

Australia’s central bank raised its benchmark rate by 25 basis points to 3.85% on Tuesday, marking the Reserve Bank of Australia’s first rate hike since November 2023 as inflation continues to rise.

The Reserve Bank of Australia’s decision matched the expectations of economists polled by Reuters and followed data showing inflation at an all-time high. the highest level in six quarters.

“Private demand is growing faster than expected, capacity pressures are greater than previously assessed and labor market conditions are somewhat tight,” according to the central bank statement, noting that inflationary pressures intensified “significantly” in the second half of last year.

Senior RBA officials have repeatedly opposed expectations of rate cuts. Earlier this year, Reserve Bank of Australia deputy governor Andrew Hauser said the likelihood of a short-term rate cut was “probably very low”, citing still-high inflation. The central bank has an inflation target of 2.5%

Gov. Michele Bullock echoed that stance after the bank’s Dec. 9 rate decision, announcing interest rate cuts. were not on the horizon in the foreseeable future.

When asked at the time whether the bank would consider further increases, Bullock said the bank would evaluate the economic data on a “meeting by meeting” basis.

“If inflation continues to be persistent and appears not to be falling back towards the Council’s target… the Council may need to consider whether or not it is appropriate to keep interest rates where they are or, indeed, increase them at some point,” she said.

The Australian economy increased by 2.1% in the third quarter, up from the previous quarter’s revised 2% rate and marking its fastest pace of expansion in about two years.