Australia's Central Bank Hikes Interest Rates for Second Consecutive Month

Canberra. Australia's central bank on Tuesday raised its key interest rate by 0.25 percentage points for the second consecutive month.

The Reserve Bank of Australia (RBA) announced after its monetary policy board meeting on Tuesday that it decided to increase the target cash rate from 3.85 percent to 4.10 percent. This increase is a continuation of the 0.25 percentage point hike made at the beginning of February.

This is the first time since June 2023 that the central bank has raised interest rates for two consecutive months. Economists and banks widely projected an interest rate hike from Tuesday's meeting due to the high increase in inflation in December and January, and the potential economic impact of the ongoing war in the Middle East.

 Commenting on this decision, Treasurer Jim Chalmers stated in a press release that this increase in interest rates is truly difficult news for millions of Australians with mortgages.  

According to the latest official data from the Australian Bureau of Statistics, the Consumer Price Index (CPI) increased by 3.8 percent in the 12 months up to December and January. This increase is above the RBA's target range of 2 to 3 percent. The central bank, in its official projection released in February, estimated that annual CPI growth would reach 4.2 percent by next June and only fall within the target range twelve months after that.  

In Tuesday's decision statement, the monetary policy board noted that there is a risk that inflation will remain above the target range for longer than previously anticipated. The conflict in the Middle East has led to a sharp increase in fuel prices, which, if sustained, is likely to further increase inflation.

 Speaking to reporters after the meeting, RBA Governor and Chair of the Monetary Policy Board, Michele Bullock, stated that inflation was already quite high globally before the surge in oil prices due to the conflict in the Middle East.

 When asked whether the RBA is prepared to push Australia into a recession to control inflation, Bullock indicated that this might be necessary. Five out of the nine members of the monetary policy board voted in favor of the interest rate hike, while the remaining four members voted to keep the interest rate unchanged.