Australia’s Central Bank Will Move Ahead with More Rate Hikes as Inflation Running High

Australia’s central bank shows concerns that the 32-year higher inflation could be stickier than it anticipated and expects to move forward with more rate hikes in the months ahead.

Minutes of the February 7 policy meeting were released on Tuesday and showed that the Reserve Bank of Australia’s (RBA) only discussed two options in the meeting, which were a 50 bps or 25 bps raise. The move was different from December when the central bank considered staying put.

The minutes showed that a trend of upward surprises on inflation and wages had urged the central bank to make a larger move.

RBA decided to raise its cash rate 25 basis points to 3.35%, its highest level in just over a decade. Rates have climbed 325 bps since last May last year.

Inflation is running at a 32-year high of 7.8% and is only expected to slow down to the top-end of RBA’s target range of 2-3% by mid-2025.