Australia’s central bank concluded inflation would stay stubbornly high if it had not hiked interest rates as it did this month, and was not yet sure if further tightening would be necessary.
Minutes of the Reserve Bank of Australia’s board meeting released on Tuesday showed members were worried that the risks to its inflation and employment mandates had “shifted materially”, making the case to hike the stronger one.
“Members agreed that the data received since the previous meeting had strengthened their concern that, without a policy response, inflation would remain persistently above target for too long,” the minutes showed.
As a result, the board decided unanimously to raise the cash rate 25 basis points to 3.85%, thus reversing one of the three cuts made in 2025. Markets are wagering inflation could also prove stubborn enough this quarter that the board will hike again to 4.10% at its May meeting.
Consumer price data for the first quarter are due out in late April and analysts suspect core inflation will remains stuck near 3.4%, well above the RBA’s target range of 2% to 3%.
