The Reserve Bank of Australia raised interest rates by 0.50% to a seven-year high of 2.35% on Tuesday, the fifth consecutive half-point increase since May, in line with analyst expectations in a Reuters poll.
The central bank did drop a reference to “normalizing” policy, implying that interest rates were now closer to neutral, but it also indicated that there was still work to be done.
“Price stability is a prerequisite for a strong economy and a sustained period of full employment,” said RBA Governor Philip Lowe in a statement. “The Board expects to increase interest rates further over the months ahead, but it is not on a pre-set path.”
With inflation at a 21-year high of 6.1% and expected to surpass 7% by Christmas, Reuters said that the markets are leaning on another half-point hike in October and for rates to peak around 3.85%.