The Reserve Bank of Australia (RBA), which had held the interest rate steady for the previous month, decided to increase the cash rate goal by 25 basis points to 3.85 percent on Tuesday. Additionally, the rate paid on Exchange Settlement balances was increased by 25 basis points to 3.75 percent.
It represents the central bank’s eleventh increase in a calendar year. The interest rate was also raised to its highest level since May 2012, when it was reduced to 3.75 percent.
RBA Governor Philip Lowe stated in a statement following a board meeting that although Australian inflation has peaked, it is still too high at 7% and would take some time to return to the target range of 2-3%.
“The Board judged that a further increase in interest rates was warranted today,” said Lowe, “given the importance of returning inflation to target within a reasonable timeframe.”
The central prediction still predicts that it would take a few years before inflation returns to the top of the target range, with inflation predicted to be 4.5 percent in 2023 and 3 percent in mid-2025, despite the fact that recent data showed a “welcome decline” in inflation.
