The Reserve Bank of Australia (RBA) raised its key interest rate by 25 basis points to 4.85% on Tuesday, marking the highest level since November 2008. This was the fifth rate increase this year and the third consecutive meeting where the central bank opted for a hike. The decision was split, with six members voting for the increase and three preferring to hold rates steady.
The RBA cited persistent inflation as the primary reason for the rate hike, noting that inflation is not expected to return to its 2%-3% target range until late 2027. Higher fuel and commodity prices, along with rapid growth in technology-related goods driven by AI-related investment, were identified as key factors contributing to the inflationary pressures.
Governor Michele Bullock emphasized the bank's determination to tame inflation during a news conference at the central bank's head office in Sydney. The move underscores Australia's outlier status among global counterparts, as many other central banks have either paused or reduced their rate hikes.