Sydney:Australia's central bank has announced a significant increase in its benchmark interest rate, raising it by 25 basis points to an 18-year high of 4.85%. This decision was made in response to ongoing inflation pressures and aligns with market expectations.

According to Anadolu Agency – English, the Monetary Policy Board of the Reserve Bank of Australia (RBA) decided on this rate hike with a majority vote. Six members supported the quarter-point increase, while three members preferred to maintain the cash rate target at 4.60%.

The board has noted that inflation remains elevated and broadly based. Updated staff forecasts have adjusted the medium-term inflation outlook upward. This revised outlook is influenced by elevated fuel and commodity prices, which are driven by geopolitical conflicts in the Middle East, as well as domestic capacity constraints and rising costs for technology goods spurred by investment in artificial intelligence.

Projections indicate that inflation will stay above 3% over the next year and is not expected to return to the central bank's target range of 2-3% until late 2027. This timeline is approximately three quarters later than previous estimates.