Australia’s central bank has surprised markets by raising its benchmark interest rate by a lower-
than-expected quarter of a percentage point (25-basis points) to 2.60%.
The latest interest rate hike by The Reserve Bank of Australia sent the country’s currency and
government bond yields sharply lower.
In a written statement, central bank governor Philip Lowe said he remains commitment to
monetary tightening, albeit at a slower pace moving forward.
The latest interest rate increase ends four consecutive 50-basis point hikes by Australia’s
central bank. Most economists had forecast a fifth half point rate increase this time around.
The surprise decision led to the biggest drop in three-year government bond yields since 2008,
when the central bank cut interest rates by 100-basis points amid the global financial crisis.
The Australian dollar fell 1% on news of the latest interest rate hike, while the nation’s
benchmark stock market extended its advance to 3.7% on the day.
Australian politicians and central bank officials have expressed concerns that the country’s
housing market is among the world’s most indebted and vulnerable to higher mortgage rates.
