SYDNEY (Reuters) – Australia’s central bank on Tuesday stunned markets by raising its cash rate 25 basis points when traders had looked for an extended pause, saying inflation was way too high and even higher rates might be needed to bring it to heel.
Wrapping up its May policy meeting, the Reserve Bank of Australia (RBA) lifted rates to 3.85% and said “some further” tightening may be required to ensure that inflation returns to target in a reasonable timeframe.
Markets had been wagering heavily on a steady outcome given core inflation had eased a little more than expected and the full pain of the RBA’s past tightening was yet to be felt in the economy. [AU/INT]
(Reporting by Wayne Cole; Editing by Shri Navaratnam)
