Reserve Bank of Australia Hikes Interest Rates to 4.85%

The Reserve Bank of Australia raised its benchmark interest rate by 25 basis points this Tuesday. The cost of credit in the country has reached 4.85% per year. This is the highest level recorded by the monetary authority since 2008.

The decision followed the committee's upward revision of price growth estimates. Recent data shows that consumer inflation exceeded 4% in the twelve months ending in September. The institution's official target is 2.5%.

The monetary policy committee voted six to three in favor of the hike. The official statement noted that underlying inflation remains widespread across the economy. Officials cited that rising fuel costs and investments in artificial intelligence infrastructure are putting pressure on demand.

The monetary tightening aims to prevent high inflation expectations from becoming entrenched in the long term. The Australian central bank kept the possibility of further future adjustments open. The measure comes as the local housing market faces its fastest price drop in four decades.

Tighter financial conditions in developed economies tend to increase global risk aversion and strengthen the dollar against riskier currencies. The move adds pressure to liquidity-sensitive assets like Bitcoin by raising the opportunity cost of capital.