Australia’s central bank raised interest rates unexpectedly

The Central Bank of Australia (RBA) announced that it raised the reference interest rate in May by 25 basis points to 3.85 percent.

The markets have forecast that the reference interest rate will remain at the same level as in April. That is, it will amount to 3.6 percent, reports Euronews referring to Tanjug.

The Reserve Bank of Australia has raised the benchmark interest rate 11 times in a year, and borrowing money is now the most expensive since April 2012.

The Central Bank of Australia explained this step by the need to curb seven percent inflation, which is still too high despite a gradual reduction.

Also, the RBA believes it will take years to suppress inflation in Australia to the desired level and estimates that this year the inflation rate will be between four and 4.5 percent, while it will decrease to three percent in mid-2025.

The growth of goods slowed down

The increase in the prices of goods has slowed down due to a better ratio of supply and demand, but the prices of services are still rising. Unemployment is the lowest in the last 50 years, and the situation in the labor market is tense because companies in Australia are finding it increasingly difficult to find workers, the announcement says.

The RBA has warned that even tighter fiscal policy may be needed in the future to tame the country’s inflation to between two and three percent.