"Fighting Inflation"... Australia Raises Benchmark Interest Rate by 0.5%p for Two Consecutive Months for the First Time in History

Philip Lowe, Governor of the Reserve Bank of Australia (RBA)
[Photo by Reuters]

[Asia Economy Reporter Hyunjin Jeong] The Reserve Bank of Australia (RBA) raised the benchmark interest rate by 0.5 percentage points from 0.85% to 1.35% on the 5th. Bloomberg News reported that this is the first time the RBA has consecutively raised interest rates by 0.5 percentage points.

According to the report, the RBA raised the benchmark interest rate by 0.5 percentage points from 0.35% to 0.85% on the 7th of last month, and then raised it again by 0.5 percentage points within a month. This rate hike aligns with market expectations. Financial markets had anticipated that the RBA would raise the benchmark interest rate by 0.5 percentage points to curb soaring inflation.

At the conclusion of the monetary policy meeting on the day, the RBA indicated that additional measures might be necessary in the coming months, signaling further rate hikes. RBA Governor Philip Lowe stated, "Household budgets are under pressure from high inflation and interest rates, but recent consumption data is positive," adding that they will closely monitor the impact of rate hikes on household consumption. Governor Lowe had previously warned that the benchmark interest rate could rise to 2.5%.

Diana Mousina, Chief Economist at AMP Capital Markets, expects the RBA to raise rates by another 0.5 percentage points next month but does not see the need to consider a 0.75 percentage point increase like the U.S. Federal Reserve (Fed).

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