The Reserve Bank of Australia (RBA) has raised its key interest rate by 25 basis points to 3.85%, aligning with market expectations. The RBA's hawkish tone indicates that inflation pressures are likely to persist, suggesting further policy tightening may be on the horizon. The market is currently pricing in another rate hike by the end of the year, reflecting cautious optimism about economic growth, notes Bob Savage, Head of Markets Macro Strategy at BNY.

RBA raises rates amid inflation concerns

"Its view that 'inflation is likely to remain above target for some time' is a clear signal that further policy tightening may be expected."

"The market is currently pricing in one more rate hike by the end of the year, which seems on the conservative side if inflation and the labor market continue to surprise to the upside."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)