The Reserve Bank of Australia (RBA) raised its key interest rate by 0.25% to 0.35% at its meeting today. Analysts expected the RBA to raise rates by only 0.15% to 0.25
The RBA raised interest rates for the first time in more than 10 years, signaling that more rate hikes are likely in the future.
The RBA issued a statement after the meeting saying this is the right time for the RBA to start withdrawing its financial support measures. This is because inflation in Australia has spiked significantly and the Australian economy is on the verge of reaching its full employment potential.
“The RBA Board of Directors is committed to doing what it deems necessary to ensure that Australia inflation will return to target. To achieve such goals Interest rates need to be raised,”RBA Governor Phillip Low said
The higher-than-expected rate hike came today after the consumer price index (CPI) rose to 5.1% in the first quarter of 2022, its highest level in 20 years.
ANZ reported today that the Australian Consumer Confidence Index fell 6.0% last week. This was the sharpest decline since COVID-19 began. Consumers are concerned that rising inflation could impact the cost of living and cause the Reserve Bank of Australia to raise interest rates.