Australian central bank decides on first rate hike in 11 years

A rise was widely expected after official data released last week showed inflation rose to 5.1% in the year through March

AgenciesUpdated: Tuesday, May 03, 2022, 10:46 AM IST
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The Reserve Bank of Australia adjusts interest rates to keep inflation within a 2-3 percent target band. /Representative image | FreePik

Australia's central bank on Tuesday lifted its benchmark interest rate for the first time in more than 11 years. The cash rate rose from 0.1 percent to 0.35 percent.

A rise was widely expected after official data released last week showed that Australia's inflation rose to 5.1 percent in the year through March. It is the highest annual rate since 2001 when a newly introduced 10 percent federal consumption tax created a temporary spike.

Inflation in the latest March quarter was sharply higher than the 3.5 percent three months earlier. The March result was driven by a surge in fuel and housing costs as well as food shortages created by recent Australian floods.

The Reserve Bank of Australia adjusts interest rates to keep inflation within a 2-3 percent target band.

The cash rate has been at a record low of 0.1 percent since November 2020.

The bank last increased interest rates in November 2010. The cash rate then rose a quarter of a percentage point to 4.75 percent.

It is the first time that the bank, whose independence of government was enshrined in legislation in 1996, has shifted interest rates during a federal election campaign since 2007.

Two weeks after the benchmark rate rose by 0.25 of a percentage point to 6.75 percent in November 2007, Prime Minister John Howard's conservative government was voted out of office after more than 11 years in power.

Prime Minister Scott Morrison's conservative government is seeking a rare fourth three-year term at elections on May 21.

(With PTI inputs)

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