Reserve Bank of Australia expected to raise interest rate to highest level in 18 years

Bloomberg reported that Australia's central bank is poised to raise interest rates for a fifth time this year on Tuesday. Most economists expect the nine-member board of the Reserve Bank of Australia to increase the cash rate by a quarter-percentage point to 4.85 percent. Bloomberg added that money markets are pricing in about an 80 percent chance of a rate hike ahead of the official decision at 2:30 p.m. [1]

The potential quarter-point increase would push Australian interest rates to an 18-year high. According to Bloomberg, the central bank is intensifying efforts to control inflation that remains among the strongest in the developed world. The rate decision will be released alongside updated economic forecasts and followed by a press conference hosted by Governor Michele Bullock. [1]

Major financial institutions in Australia also anticipate policy tightening. TheBull.com.au reported that the Big Four banks expect an interest rate hike at the November Reserve Bank of Australia meeting. Meanwhile, central banks globally continue to adjust monetary policy against elevated consumer prices. The Wall Street Journal reported that the Bank of Canada raised its policy rate to 2.50 percent following a higher inflation outlook, after FTMQ Business reported earlier that institutions including RBC had projected a 25 basis point hike for Canada. [1][2][3][6]

Central bank interest rates determine the annualized charges levied on commercial banks for temporary loans. Central banks globally have used monetary policy tightening to cool demand and curb price increases following a worldwide surge in inflation that began in mid-2021. [4][5]