Australia Central Bank Hikes Rates by 25bps to Decade High of 3.35%

On Tuesday, the Reserve Bank of Australia (RBA) increased its cash rate by 25 basis points, bringing it to a decade high of 3.35%. The Central bank also reaffirmed its view that further increases would be necessary, but no longer provided any indication that future increases would follow a particular trajectory.

At the conclusion of its policy meeting in February, the RBA noted that core inflation had been higher than expected and that higher rates would be needed to bring inflation down to its target of 2-3%.

Given that recent inflation data has surprised on the high side, markets had anticipated a quarter-point shift, with some risk of a bigger rise. Since last May, there have been a total of nine rate increases, amounting to a 325-basis-point increase.