Australia's central bank lifts rates to 15-year high, signals risk of further hikes
TLT•The Reserve Bank of Australia unanimously raised its cash rate by 25 basis points to 4.60%, a 15-year high, and said it could raise rates further if needed.
1. Rate reaches 15-year high
The Reserve Bank of Australia raised its cash rate to 4.60% on Tuesday, its fourth increase of the year, bringing this year's tightening to a full percentage point. The board said some upside risks to inflation were materialising, citing stronger-than-expected growth and inflation data and further disruptions to global oil supply.
2. Further increases possible
The board said it would do what it considered necessary to return inflation sustainably to target, including raising the cash rate further if needed. The hike was widely expected, and markets priced in a 43% probability of another increase in November after the decision.
3. Inflation pressures persist
Rising fuel costs were expected to push headline inflation to 4.1% in August, above the RBA's 2% to 3% target band, while underlying inflation was forecast to remain at 3.6%. Australia's economy grew 2.1% in the second quarter, above the RBA's 2% sustainable pace, and household spending rose 6.8% year over year in August.
