Australia Hikes Key Rate To 4.85%; Highest Since 2008
(RTTNews) - The Reserve Bank of Australia raised its benchmark interest rate for the fifth time this year to the highest level in 18 years in order to bring inflation sustainably back to the target.
The board, governed by Michele Bullock, voted 6-3 to lift the cash rate target by 25 basis points to 4.85 percent, marking the highest rate since 2008.
The bank has raised its key rate by 125 basis points so far this year.
"Given the revised inflation outlook and the continuing upside risks, the Board judged that a further tightening in financial conditions is warranted to support the return of inflation to target," the bank said in a statement.
The RBA expects inflation to remain above 3 percent over the coming year and warned of an increasing risk that higher inflation expectations will become embedded in the economy.
The board repeatedly said that it will continue to do what it considers necessary to bring inflation sustainably back to target. However, the bank removed "including increasing the cash rate target further if needed" mentioned in the September report.
In the latest Statement On Monetary Policy, the bank said inflation is still too high and is expected to stay high for longer.
Headline inflation is expected to peak at 4.5 percent in the December quarter this year due to higher-than-expected fuel prices. It is forecast to reach the midpoint of the target in mid-2028.
The economy is projected to slow over the next few years. The bank forecasts gross domestic product to grow 1.6 percent this year and 1.3 percent next year. The unemployment rate is forecast to rise to 5.1 percent by the end of 2028, which was around 0.25 percentage points higher than previously expected.
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