Canberra, Feb 7 (IANS) The Reserve Bank of Australia (RBA) on Tuesday increased the cash rate target by 25 basis points to 3.35 per cent, delivering a ninth straight hike since the central bank began raising rates in May last year.
The RBA also lifted the interest rate on Exchange Settlement balances by 25 basis points to 3.25 per cent, reports Xinhua news agency.
RBA Governor Philip Lowe said in a statement that in Australia, CPI inflation over the year to the December quarter was 7.8 per cent, the highest since 1990, while in underlying terms, inflation was 6.9 per cent, which was higher than expected.
“Global factors explain much of this high inflation, but strong domestic demand is adding to the inflationary pressures in a number of areas of the economy,” said the Governor.
According to the statement, the central bank’s forecast for CPI inflation is to decline to 4.75 per cent this year and to around 3 per cent by mid-2025, with GDP growth expected to slow to around 1.5 per cent over 2023 and 2024.
“The full effect of the cumulative increase in interest rates is yet to be felt in mortgage payments,” Lowe noted.
With an aim of returning inflation to the 2-3 per cent range, the central bank expects further increases to be needed over the months ahead.
The latest report from Australia and New Zealand Banking Group (ANZ) and Roy Morgan showed that Australian Consumer Confidence was down 3.2 points to 83.6 from January 30 to February 5, the largest weekly drop for six months since early August 2022.
“Consumer confidence experienced its biggest weekly fall since early August 2022. Confidence about current and future finances fell sharply, perhaps sparked by concerns about the extent of cash rate rises after the Q4 inflation print,” said ANZ Senior Economist Adelaide Timbrell.