Australia’s central bank has raised its cash rate for the first time in over a decade, hiking the rate by an unexpected 25 basis points to 0.35%.
The bank also suggested more rate hikes to come, as pandemic stimulus comes to an end and inflationary pressure increases.
During its May policy meeting, the Reserve Bank of Australia (RBA) reaffirmed that it was committed to reducing inflation, saying that with the economy close to full employment the time was right to take the measures necessary to combat rising prices.
“The Board is committed to doing what is necessary to ensure that inflation in Australia returns to target over time,” said RBA Governor Philip Lowe. “I expect that further increases in interest rates will be necessary over the months ahead.”
The decision, the first rate hike since November 2010, came after consumer price inflation jumped to a 20-year high of 5.1% in the first quarter. Core inflation rose to 3.7%, exceeding the RBA’s target band for the first time since 2010, with the increases led by rising energy and food costs.
The RBA decision is bad news for Prime Minister Scott Morrison, who is in the midst of an election battle that on current polling he is set to lose. The cost of living crisis has dominated election campaigning, with many voters believing Morrison’s government has failed to do enough to protect households.
Lowe insisted the election paid no part in the decision speaking after the meeting at a news conference.