At its meeting last week, the Reserve Bank of Australia Board decided to raise the cash rate target by 25 basis points to 4.35 percent.
The reason stated is that Inflation in Australia has passed its peak but is still deemed too high, and is proving more persistent than expected a few months ago.
The latest reading on CPI inflation indicates that while goods price inflation has eased further, the prices of many services are continuing to rise briskly. While the central forecast is for CPI inflation to continue to decline, progress looks to be slower than earlier expected.
CPI inflation is now expected to be around 3½ percent by the end of 2024 and at the top of the target range of 2 to 3 percent by the end of 2025. The Board judged an increase in interest rates was warranted today to be more assured that inflation would return to target in a reasonable timeframe.
The Board had held interest rates steady since June following an increase of 4 percentage points since May last year.