Australia central bank raises rates to 10 year high, says more needed
Australia's central bank delivered a widely expected interest rate hike at its last policy decision of 2022 and said more hikes are still needed ahead as policymakers seek to rein in inflation. Wrapping up its December policy meeting, the Reserve Bank of Australia lifted its cash rate by 25 basis points to a 10-year peak of 3.1%, the eighth hike in as many months.
All 30 economists polled by Reuters had expected the RBA to go for another modest 25 basis point hike, its third in a row after a sucession of half-point hikes. "The Board expects to increase interest rates further over the period ahead, but it is not on a pre-set course," said Governor Philip Lowe in a statement. "The size and timing of future interest rate increases will continue to be determined by the incoming data and the Board's assessment of the outlook for inflation and the labour market."
The tightening trend will pause at least until February, when the central bank next meets on policy after a yearend break, giving it time to assess the impact of the hefty 300 basis points in cumulative rate hikes since May.
There are signs the rate hikes may already have begun to cool the economy, with the monthly consumer inflation rate easing in October, although the recently launched data series does not include utility costs.
The quarterly inflation series is expected to peak at about 8% this quarter. After the policy decision was released, the local dollar edged up slightly to $0.6729, with the statement appearing slighly less dovish than markets had been looking for.
Markets have nudged up the expected peak for interest rates to around 3.6% by July next year, up from 3.5% before the decision.