The Reserve Bank of Australia (RBA) has raised its official cash rate by 0.25% to 3.35%, marking the ninth consecutive increase.
The RBA warned that further increases will be necessary in the coming months to reach its inflation target, which was 7.8% in the December quarter of 2022, the highest since 1990.
"The Board expects that further increases in interest rates will be needed over the months ahead to ensure that inflation returns to target and that this period of high inflation is only temporary," RBA Governor Philip Lowe said in a statement.
"The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that."
The central bank’s statement has resulted in a revision of forecasts by Commonwealth Bank of Australia (CBA), the country's largest bank.
The CBA had initially expected the RBA's rate rise to be the last, but now predicts two more 25 basis point increases in March and April, peaking at 3.85%. The ANZ is sticking to its earlier forecast of a 3.85% peak rate.
The RBA also noted that the global economy remains subdued with below average growth expected this year and next. The Australian economy grew strongly in 2022, but the central forecast for 2023 and 2024 is for a slowdown to 1.5% GDP growth.
The tight labor market, with an unemployment rate of 3.5%, is driving wages growth, and the RBA will closely monitor labor costs to avoid a prices-wages spiral. The central bank is focusing on returning inflation to the 2-3% range, but acknowledges the path to a soft landing is narrow.
