Australia's Key Rate Raised in Unforeseen Move, Potential for Further Tightening Ahead

Australia’s central bank unexpectedly raised its key interest rate and kept the door open to further hikes, fretting that policy needs to be tighter in order to be confident that inflation will return to target in mid-2025.

The Reserve Bank raised its cash rate by a quarter-percentage point to 4.1%, the highest level since April 2012, bringing its cumulative tightening to 4 percentage points since May last year. Only 10 of 30 economists predicted the rate rise while money markets saw about a one-in-three chance of a hike.

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