Australia lifts rates to near-decade high as inflation soars

SYDNEY: Australia's central bank raised borrowing on Tuesday to their highest level in almost a decade as it tried to rein in soaring inflation but brushing off calls to be more aggressive.

The Reserve Bank of Australia's 25-basis-point move marks the seventh consecutive increase and is in line with a global effort to temper price rises fanned by soaring energy and food costs.

"As is the case in most countries, inflation in Australia is too high," governor Philip Lowe said in a statement after the decision, which leaves borrowing costs at 2.85 percent, their highest level since April 2013.

Markets had expected the 25 basis point rise, but there were vocal calls for a 50-point lift to tame an increasingly painful cost of living crisis, with inflation hitting 7.3 percent last month on the back of a spike in fuel and food costs.

"A further increase in inflation is expected over the months ahead, with inflation now forecast to peak at around eight percent later this year," the bank said.

But with many home-owning Australians feeling the pinch from rising interest rates, the central bank faces a difficult balancing act in the months ahead.

"We now look for a follow-up 25 basis points in December. Along with a further 75 basis points of rate hikes in the first half of 2023, we now have the RBA cash rate peaking at 3.85 percent," said researchers at ANZ.