The Reserve Bank of Australia has raised the cash rate to 0.85 per cent from 0.35 per cent at its board meeting, the second consecutive monthly increase as it tries to rein in ballooning inflation.
A rate hike had been widely anticipate after the central bank’s first increase in more than a decade last month, although most economists had expected a smaller increase.
The 50 basis point hike was the largest single increase since February 2000.
“Inflation in Australia has increased significantly,” RBA governor Philip Lowe said in a statement on Tuesday.
“Higher prices for electricity and gas and recent increases in petrol prices mean that, in the near term, inflation is likely to be higher than was expected a month ago.”
Dr Lowe said the board expects to take further steps in the process of normalising monetary conditions in Australia over the months ahead.
“The size and timing of future interest rate increases will be guided by the incoming data and the board’s assessment of the outlook for inflation and the labour market.”
Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)