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ShreeMetalPrices: RBA Surprises Banks & Borrowers with 25bps rate hike to 3.85%


Following a policy meeting on Tuesday, the Reserve Bank of Australia’s shocked the financial markets by increasing its official cash rates by twenty-five basis points to 3.85% and restarting a ferocious campaign of increases.

Despite consumer price index data from the first quarter last week showing that inflation probable peaked in late 2022. The decision to enhance interest rates even further was made.

RBA Governor Philip Lowe said in a statements that while Australia’s inflation has peaked. It is still too high at 7% and would take some time to return to the target range.

The board decided that another hike in interest rate was necessary today. He added, “given the significance of getting inflation back to target in a reasonable amount of time.”

The RBA stopped raising interest rates aggressively in April, breaking a record of 10 straight hikes, saying it wanted to gauge the effect of the tightening so far before considering its next course of action.

Inflation is anticipat to reach 4.5% in 2023 and 3% in mid-2025, according to Mr. Lowe. Despite the recent data showing a welcome fall in inflation. The central prediction still predicts that it will take a few years before inflation return to the top of the targeted range.

He said that a better balance between supply and demand as a result of the pandemic disruptions’ resolution had caused a discernible slowdown in the inflation of goods prices.

However, the inflation of services prices is still very high and widespread. And Mr. Lowe noted that overseas experience suggests there may be upside risks.

In addition, he noted, labour costs are rising “briskly,” while productivity growth is still just moderate.
With the decision to increase interest rates.

The RBA has once again joined the ranks of other central banks. Such as the Bank of England and the U.S. Federal Reserve. Which are also anticipat to keep raising rates despite ongoing worries about the world banking industry.