SYDNEY, June 6 (Reuters) – The central bank of Australia (RBA) on Tuesday raised its key interest rate by a quarter point to 4.1%, an 11-year high, stressing that further hikes may be needed to ensure that inflation returns to its target.
Financial markets were tilting in favor of a pause, even though they had factored in a sizable 40% chance of the RBA raising its rate by 25 basis points.
“Inflation in Australia has passed its peak. But at 7% it is still too high and it will still take time before it gets back into the target range,” said central bank governor Philip Lowe. , in a press release.
“This further rate hike is intended to bolster confidence that inflation will return to target within a reasonable time frame,” he added.
On the foreign exchange market, the Australian dollar (+0.86%) climbed to its highest level in more than two weeks against the American dollar after the announcement of the RBA’s decision.
The latter has raised its key rate by 400 basis points since May 2022, carrying out the fastest monetary tightening in its modern history. (Stella Qiu, French version Laetitia Volga)