The Reserve Bank of Australia raised interest rates by 25 basis points to reach 3.85%, contrary to expectations that they would remain stable at 3.60% at the bank’s meeting that was held this morning, Tuesday, May 2nd, after keeping them unchanged at the last meeting.
And the interest statement issued by the bank stated that inflation in Australia is still very high and it will take some time to return to the bank’s target, as it recorded 7% in the last reading and retreated from peak levels. The bank expects inflation rates to return to levels of 4.5% during the current year and about 3% this year 2025.
Recent data showed that the labor market is still tight, as unemployment rates reached their lowest levels in 50 years, and the Council expects them to gradually rise to levels of 4.5% in the year 2025, while the bank expects the growth levels in the gross domestic product to rise by 1.25% in the current year and to 2% in the year 2025.
The bank affirmed that it is committed to returning inflation to the bank’s target range of 2-3%, stressing that there may be a need for further tightening of monetary policy.
The reaction of the Australian dollar was positive, and the pair rose by more than 80 points against the US dollar, and is trading at 0.6710 levels.