What happened
The Reserve Bank of Australia has increased interest rates to a 15-year high, raising the cash rate target by 25 basis points to 4.6 percent. This move is an effort to combat high inflation, according to RBA governor Michele Bullock. The decision was unanimous among the central bank's nine-member board.
Economists had predicted the rate hike, but there is less consensus on whether further increases will be made. Bullock's comments suggested that additional rate hikes are possible if necessary to control inflation. Some analysts believe a November rate hike is likely, which would increase monthly mortgage repayments.
The RBA's decision follows recent rate rises by central banks in other countries, including the United States, Europe, and Japan. Australia now has one of the highest interest rates among advanced economies, surpassed only by Iceland.
The underlying issue driving inflation is excess demand in the domestic economy, according to Bullock. However, the Middle East conflict and the global artificial intelligence investment boom are also contributing factors. Treasurer Jim Chalmers acknowledged that the conflict is a major factor driving inflation, but not the only one.
