The cash rate increased by 25 basis points to 3.85% today, says the Reserve Bank of Australia (RBA)
It says while inflation has passed its peak, at 7% it is still too high and that it will be some time before it is back within the target range of between 2% and 3% a year.
“Given the importance of returning inflation to target within a reasonable timeframe, the Board judged that a further increase in interest rates was warranted today,” stated the RBA in a press release.
“The Board held interest rates steady last month to provide additional time to assess the state of the economy and the outlook. While the recent data showed a welcome decline in inflation, the central forecast remains that it takes a couple of years before inflation returns to the top of the target range; inflation is expected to be 4.5% in 2023 and 3% in mid-2025.”
The RBA also pointed to data that confirmed the labour market remains tight, with the unemployment rate at a near 50-year low.
“Many firms continue to experience difficulty hiring workers, although there has been some easing in labour shortages and the number of vacancies has declined a little,” stated the RBA.
The RBA warned that the cash rate could rise again “to ensure that inflation returns to target in a reasonable timeframe”.
