FX.co ★ Australia Central Bank Raises Rate By 25 Bps

Australia's central bank hiked its key interest rate by a quarter-point, as widely expected, on Tuesday.

The policy board of the Reserve Bank of Australia decided to lift the cash rate target by 25 basis points to 3.60 percent.

The interest rate on Exchange Settlement balances was also raised by 25 basis points to 3.50 percent.

The RBA has tightened its monetary policy by altogether 350 basis points since May 2022.

The bank said it aims to bring inflation back to the 2-3 percent target range while keeping the economy on an even keel, but the path to achieving a soft landing remains a narrow one.

"The board expects that further tightening of monetary policy will be needed to ensure that inflation returns to target and that this period of high inflation is only temporary," RBA Governor Philip Lowe said.

The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that.

The RBA is likely to lift the cash rate to 4.1 percent by May and the first interest rate cut would be in May 2024, Capital Economics' economist Marcel Thieliant, said.