Subject: Statement by the Monetary Policy Board: Monetary Policy Decision

⚡️ Highlights:

1. Inflation has increased significantly due to capacity pressures and higher fuel prices resulting from the conflict in the Middle East. Many firms are looking to increase prices of goods and services, and short-term inflation expectations have also risen.

2. The Bank's updated forecasts show that underlying inflation is expected to peak higher than previously expected, before declining as demand growth slows and capacity pressures ease in response to higher interest rates.

3. Financial conditions have tightened, with money market interest rates and government bond yields rising, and the exchange rate appreciating. However, credit remains readily available to households and businesses.

4. There are heightened uncertainties about the outlook for domestic economic activity and inflation due to the ongoing conflict in the Middle East. Higher energy prices and prolonged uncertainty could lead to higher inflation and lower growth in Australia and its major trading partners.

5. The Board decided to increase the cash rate target by 25 basis points to 4.35 per cent in response to the likelihood that inflation will remain above target for some time, with risks tilted to the upside. The Board will continue to monitor data and risks to guide its decisions and is focused on delivering price stability and full employment.

✍️ Reserve Bank of Australia | Full Article

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