The Reserve Bank of Australia. Source: Reuters
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  • The Reserve Bank of Australia (RBA) lifts interest rates by 25 basis points to 0.35 per cent, whilst flagging the need for future cash rate rises to tame inflation
  • With the COVID-19 effects now mostly limited, the board decided it was the right time to lift rates as the Australian economy is performing strongly
  • Inflation was a key focus, with prices picking up more than the RBA expected
  • The RBA is still concerned about the effects of the war in Russia, disruptions of COVID-19, and reduced purchasing power from inflation
  • However, it mostly believes economic growth for Australia remains positive

The Reserve Bank of Australia (RBA) has lifted interest rates by 25 basis points to 0.35 per cent, whilst flagging the need for future cash rate rises to tame inflation.

This is above what the market was expecting, with many predicting a rise of 15 basis points.

With the COVID-19 effects now mostly limited, the board decided it was the right time to lift rates as the Australian economy is performing strongly.

Inflation was a key focus, with prices picking up more than the RBA expected.

The central forecast is for headline inflation to reach 6 per cent this year, based on the assumption of further interest rate hikes.

“The board is committed to doing what is necessary to ensure that inflation in Australia returns to target over time,” Governor Philip Lowe said.

“This will require a further lift in interest rates over the period ahead. The board will continue to closely monitor the incoming information and evolving balance of risks as it determines the timing and extent of future interest rate increases.”

A number of other factors helped guide the Central Bank in its decision including unemployment and GDP growth.

Over the last four months, unemployment has been falling, currently sitting at 4 per cent. It is forecast to continue its move downwards into 2023, with job vacancies high.

The RBA is still concerned about the effects of the war in Russia, disruptions of COVID-19, and reduced purchasing power from inflation.

However, it mostly believes economic growth for Australia remains positive. GDP is forecast to grow 4.5 per cent this year and 2 per cent next year.

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