Australia Central Bank Hikes Key Rate By 25 Bps

Australia's central bank raised its key interest rate as inflation picked up more than expected largely due to supply-side disruptions.

The policy board of the Reserve Bank of Australia headed by Governor Philip Lowe decided to lift the cash rate target by 25 basis points to 35 basis points. Markets had expected a 15 basis-point hike.

The board also increased the interest rate on Exchange Settlement balances from zero percent to 25 basis points.

The Board judged that now was the right time to begin withdrawing some of the extraordinary monetary support that was put in place to help the Australian economy during the pandemic, the bank said in the statement.

The economy has proven to be resilient and inflation has picked up more quickly, and to a higher level, than was expected.

The Board is committed to doing what is necessary to ensure that inflation in Australia returns to target over time, the bank said. This will require a further lift in interest rates over the period ahead.

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