Australian central bank raises rates to 18-year high of 4.85%
Australia's central bank raised its key interest rate by 0.25 percentage points to 4.85 per cent, an 18-year high, in a split vote. The bank cited persistent inflation, including from AI-related investment and Middle East conflict, and pushed back its timeline for inflation to return to target by ab
The Reserve Bank of Australia raised its key interest rate by 0.25 percentage points to 4.85 per cent on 3 November, marking an 18-year high, in line with market expectations. The increase, the second consecutive rise, was approved by six board members while three voted to hold rates steady.
The central bank said data showed inflation remained elevated with upside risks, justifying the move to bring price growth sustainably back to target. It forecast inflation would stay above 3 per cent over the next year and remain high for most of that period, only reaching the upper end of its 2 to 3 per cent target range by late next year. That timeline is about three quarters later than previously projected.
The bank sharply upgraded its inflation forecasts, partly reflecting higher fuel and other commodity prices due to the Middle East conflict. It also cited tighter-than-expected domestic capacity pressures and a rapid rise in technology product prices driven by investment related to artificial intelligence, noting that inflation for many goods and services remained stubbornly high.
According to the bank, this year's rate increases have tightened financial conditions, slowing economic growth, pushing house prices significantly lower and raising unemployment. It expects output growth to slow further in the coming year, which it said would help return inflation to its target level.