Reserve Bank of Australia hikes interest rates by 25 bps to 4.35%

07 Nov '23

2 min read

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The Reserve Bank of Australia raised the cash rate target by 25 basis points to 4.35 per cent, also increasing the Exchange Settlement balances rate to 4.25 per cent.
Amid persistent inflation, the Board forecasts a decline to about 3.5 per cent by late 2024.
Despite slower economic growth and a cooling labour market, its focus is on reining in inflation.

The Reserve Bank of Australia has increased the cash rate target by 25 basis points, reaching 4.35 per cent. This decision aligns with efforts to counter inflation, which, despite peaking, continues to challenge the economy with its stubborn persistence. The corresponding rate for Exchange Settlement balances also saw a rise to 4.25 per cent.

Inflation forecasts have been adjusted, with the latest projections indicating a decline to about 3.5 per cent by the end of 2024 and settling within the target range by the end of 2025. The central bank's assertive action comes after a period of steady rates since June and a cumulative increase of 4 percentage points since the previous year, Michele Bullock, governor, Reserve Bank of Australia, said in a statement.

The economy, while growing slower than usual, has outperformed expectations in the first half of the year. However, the labour market's robustness is showing signs of easing, and housing prices continue to surge. Despite these challenges, the Board's priority remains to bring inflation back to its target to mitigate the broader economic impact.

The Bank's future policy decisions will hinge on incoming data and the ongoing assessment of risks, with a steadfast resolve to anchor inflation expectations firmly within the target range.

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