The Reserve Bank of Australia today increased its main policy rate, the cash rate, by 25 basis points from 3.10 percent to 3.35 percent, in line with the consensus forecast. Since it began to normalise policy settings last May the RBA has raised policy rates at nine consecutive meetings, with the cumulative increase over this period now at 325 basis points. Headline quarterly inflation accelerated to 7.8 percent in the three months to December, its highest level since 1990 and even further above the RBA's target range of 2.0 percent to 3.0 percent.

The statement accompanying the decision attributes this strength in inflation to both domestic and global factors. Officials continue to expect headline inflation to moderate over 2023 and to fall to around the top of their target range by mid-2025. They also again note that tighter monetary policy will likely weigh on consumer spending in coming months, with GDP growth expected to slow to around 1.5 percent in both 2023 and 2024. They also caution, however, that the household finances are likely to come under further pressure, that the outlook for the global economy is uncertain, and that domestic wage growth is likely to pick up as the labour market remains tight, creating upside risk for the inflation outlook.

In today's statement officials have reaffirmed their determination to return inflation to the target range and have again promised they"will do what is necessary to achieve that". They warn, however, that this determination to subdue inflationary pressures will present risks to the growth outlook, reiterating that the"the path to achieving a soft landing remains a narrow one".

The statement also notes that officials continue to expect they will increase policy rates further in coming months. In contrast to the statement after their December meeting, however, today's statement no longer notes that officials are not on a"pre-set course". This suggests officials wish to strengthen the message that further rate hikes are likely. Officials will provide more details about the policy outlook and updated growth and inflation forecasts in the quarterly Statement on Monetary Policy to be published later in the week.

With inflation still way over target, the Reserve Bank of Australia is once again expected to raise its policy rate, by a 25-basis-point increment as it has at each of its last three meetings.

The Reserve bank of Australia (RBA) announces its monetary policy with regard to interest rates on the first Tuesday of each month with the exception of January when it is on vacation. The RBA is the central bank of Australia and its duty is to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people. It does this by setting the cash rate to meet an agreed medium-term inflation target, working to maintain a strong financial system and efficient payments system.

The Reserve Bank of Australia's (RBA's) main responsibility is monetary policy. Policy decisions are made by the Reserve Bank Board with the objective of achieving low and stable inflation over the medium term. Other responsibilities include maintaining financial system stability, while at the same time promoting the safety and efficiency of the payments system. The RBA regards appropriate monetary policy as a major factor contributing to the Australian dollar's stability, which in turn leads to full employment and the economic prosperity for Australia.

The RBA is unique among the central banks - it has two boards with complementary responsibilities. The Reserve Bank Board is responsible for monetary policy and overall financial system stability. The Payments System Board has specific responsibility for the safety and efficiency of the payments system.

The RBA sets an interest rate at which it lends to financial institutions. This interest rate then affects the whole range of interest rates set by commercial banks and other institutions for their own savers and borrowers. It also tends to affect the price of financial assets, such as bonds and shares, and the exchange rate, which affect consumer and business demand in a variety of ways. Lowering or raising interest rates affects spending in the economy.

The level of interest rates affects the economy. Higher interest rates tend to slow economic activity; lower interest rates stimulate economic activity. Either way, interest rates influence the sales environment. In the consumer sector, few homes or cars will be purchased when interest rates rise. Furthermore, interest rate costs are a significant factor for many businesses, particularly for companies with high debt loads or who have to finance high inventory levels. This interest cost has a direct impact on corporate profits. The bottom line is that higher interest rates are bearish for the financial markets, while lower interest rates are bullish.