Australia central bank raises rates to 10-year high, says more needed

The markets saw Australia’s central bank’s decision to raise interest rates to a 10-year high on Tuesday and maintain its forecast for future increases as a little hawkish since they were expecting indications of a halt in the near future.

The cash rate was increased by the Reserve Bank of Australia (RBA) by 25 basis points to 3.1%. It was the ninth rise in as many months, bringing the rate hikes since May to a significant 300 basis points. Governor Philip Lowe stated that the central bank’s board anticipates raising interest rates in the near future. The central bank has previously stated that it intended to pause and evaluate how the sudden changes would affect consumer spending. With the monthly consumer inflation rate declining in October, there are indications that the rate increases may already be starting to slow the economy.

Although the rate of reductions has started to slow, Australian home values declined for the seventh consecutive month in November, a drag on household wealth that would reduce consumer confidence and spending in the months to come.