Australia Raises Key Interest Rate For Second Straight Time

(RTTNews) - The Reserve Bank of Australia lifted its benchmark rate for the second straight time as the conflict in the Middle East poses material risk to inflation. In a close call, the policy board, governed by Michele Bullock, decided to hike the cash rate target by 25 basis points to 4.10 percent.

The decision was made by a majority vote, with five members voting to raise the rate and four seeking to hold it at 3.85 percent.

This follows the RBA's previous 25-basis-point hike in February, which was the first increase since November 2023.

Policymakers noted that the conflict in the Middle East has resulted in sharply higher fuel prices, which, if sustained, will add to inflation. Short-term measures of inflation expectations already increased.

"…the Board judged that there is a material risk that inflation will remain above target for longer than previously anticipated," the bank said in a statement.

The board also observed that there are material uncertainties about the outlook for domestic economic activity and inflation as well as the extent to which monetary policy is restrictive. Globally, the war in Iran poses substantial risks in both directions.

The bank said higher prices and prolonged uncertainty may cause growth to be lower in Australia's major trading partners and also in Australia.