RBA Hikes Rates to 15-Year High Amid Rising Inflation Pressures

Australia's central bank has raised its cash rate to a 15-year high in response to rising inflation and economic growth. The Reserve Bank of Australia (RBA) lifted rates by 25 basis points to 4.6% in its fourth hike this year, with Governor Michele Bullock stating that the board considered keeping interest rates steady but ultimately decided to tighten further.

The RBA's decision was widely expected given the recent surge in oil prices and hotter-than-expected inflation data. Brent crude has risen nearly 20% since August, threatening to broaden price pressures. Rising fuel costs are forecast to have pushed headline inflation back up to 4.1% in August, above the RBA's target range of 2% to 3%.

The board emphasized its commitment to bringing inflation sustainably back to target, including further rate hikes if necessary. Markets are implying a 33% probability for another hike in November and almost fully price in a rise by February next year. The Aussie dollar slipped 0.4% following the decision, while three-year government bond yields fell 6 basis points to 4.974%.