2023.06.0605:35:00UTC+00RBA Hikes Rate Again By 25 Bps To 4.10%, Signals More Tightening

The Reserve Bank of Australia unexpectedly raised its key interest rate on Tuesday, for a second policy session in a row, saying that inflation at 7 percent remains too high and some further policy tightening may be required in future to bring the price growth rate to target.

The RBA Board, led by Governor Philip Lowe, raised the cash rate target by 25 basis points to 4.10 percent. Economists had expected the bank to leave the rate unchanged. The key interest rate is now at its highest level since early 2012. The central bank also increased the interest rate paid on exchange settlement balances by 25 basis points to 4.00 percent.

"Inflation in Australia has passed its peak, but at 7 percent is still too high and it will be some time yet before it is back in the target range," the RBA reiterated. "This further increase in interest rates is to provide greater confidence that inflation will return to target within a reasonable timeframe."

The previous change in the cash rate target was a quarter-point hike in May. "Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will depend upon how the economy and inflation evolve," the central bank added.