Australia Unexpectedly Raises Tariffs, Tips for Further Tightening

  • Australia’s central bank raised its cash rate by 25 basis points on Tuesday.
  • The Reserve Bank of Australia said “some further tightening of monetary policy may be required to ensure inflation returns to target within a reasonable timeframe.”
  • The Australian dollar strengthened 0.9% after the move, while shares fell in Australia.

Sydney Opera House Sydney, New South Wales, Australia.

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Australia’s central bank raised its cash rate by 25 basis points in a surprise move and opened the door to further hikes – resuming its tightening cycle after a pause at its previous meeting.

The Reserve Bank of Australia It rose 25 basis points to 3.85% against market expectations. Economists polled by Reuters widely predicted the central bank would keep rates at 3.6% for a second straight meeting.

The Australian dollar strengthened further in the afternoon session on Tuesday, rising 0.84% ​​to 0.6687 against the US dollar. The benchmark S&P/ASX 200 fell 0.9%.

The yield on the 10-year Australian government bond was at 3.472% shortly after the decision.

As indicated by the Central Bank Nationwide Inflation 7% There was still “too much.”

“While recent data has shown a welcome decline in inflation, the Fed’s forecast is that it will take some years for inflation to return above the target range,” the RBA said in its statement.

The central bank forecasts full-year inflation to 4.5% in 2023.

The RBA has left the door open for further rate hikes to bring inflation down to its target of 2% to 3%.

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“Some further tightening of monetary policy may be needed to ensure that inflation returns to target in a reasonable timeframe, but that will depend on how the economy and inflation develop,” it said.

“The Board remains committed to bringing inflation back to target and will do whatever is necessary to achieve it,” it said.

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