Australia's central bank stunned markets by raising its cash rate 25 basis points when traders had looked for an extended pause, saying inflation was way too high and warned that even further tightening may be needed to bring it to heel
A worker is reflected in a wall of the Reserve Bank of Australia head office in central Sydney, Australia, March 1, 2016. REUTERS/David Gray/File Photo
The unambiguously hawkish policy stance sent the Australian dollar soaring and bond futures tumbling as markets quickly lifted the peak for interest rates. The cash rate now sits at its highest since early 2012, bringing the total RBA hikes in its price battle to a whopping 375 basis points since May last year - the fastest tightening campaign in the nation's modern history.
"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."last week confirmed that inflation was easing from 33-year highs. However, even after taking into account Tuesday's hike, it is still projected to return to 3% - the top of the RBA's target band of 2-3% - in mid-2025, according to the central bank's latest forecasts.
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