RBA Lifts Cash Rate to 15-Year High Amid Inflation Concerns
The Reserve Bank of Australia (RBA) has raised its cash rate to a 15-year high of 4.60% in its fourth hike of the year, citing concerns over inflation.
The move was widely expected, with markets now pricing in a 43% probability for another rate rise in November after the latest increase of 25 basis points.
RBA officials pointed to stronger-than-expected inflation and activity data as key factors driving their decision. 'Since the August meeting, the key developments for the RBA have been stronger than expected inflation and activity data, making it increasingly difficult for the bank to have confidence in a gradual return of inflation to target,' said Adam Bowe, head of Australia portfolio management at PIMCO.
The RBA's 100 basis points of tightening this year has more than reversed the 75 basis points of policy easing from 2020. The Australian economy has slowed amid higher borrowing costs, but not enough to dispel inflation concerns, with annual growth still running at 2.1% in the second quarter.
The labour market is gradually easing, but was still judged to be tight by the RBA, with employment growth exceeding expectations in August and the jobless rate edging up to 4.6% due to more people entering the workforce.