SYDNEY, March 17 (Xinhua) -- Australia's central bank on Tuesday raised its key interest rate by 0.25 percentage points for the second consecutive month.
The Reserve Bank of Australia (RBA) said that the Monetary Policy Board decided to increase the cash rate target from 3.85 percent to 4.10 percent at its meeting on Tuesday, matching a 0.25 percentage point rise at the start of February.
It marks the first time that the central bank has lifted the cash rate target in consecutive months since June 2023.
Economists and banks had widely forecast that the Monetary Policy Board would increase rates at its meeting on Tuesday, following a spike in inflation in December and January and the expected economic impact of the ongoing war in the Middle East.
Treasurer Jim Chalmers said in a statement that the rate hike would be "really tough news" for millions of Australians with mortgages.
"We already had an inflation challenge in our economy, but the war in the Middle East is making this challenge worse," he said.
The duration of the conflict will be the primary determinant of how much pressure it adds to global inflation and how much it is a hit to growth, he added.
According to the latest official data from the Australian Bureau of Statistics, the consumer price index (CPI) rose by 3.8 percent in the 12 months to December and January, exceeding the RBA's target range of 2-3 percent.
The central bank said in official projections released in February that it expects annual CPI growth to rise to 4.2 percent in June before falling back within the target range 12 months later.
In its decision statement on Tuesday, the Monetary Policy Board said it judged that there is a material risk that inflation will remain above target for longer than previously anticipated.
"The conflict in the Middle East has resulted in sharply higher fuel prices, which, if sustained, will add to inflation," it said.
Speaking to reporters after Tuesday's meeting, RBA Governor and Monetary Policy Board Chair Michele Bullock said that inflation was already too high before the conflict in the Middle East caused a global spike in oil prices.
Asked if the RBA would be prepared to put Australia into a recession to bring down inflation, Bullock said it may be necessary.
"We don't want to have a recession, but if it's hard to get inflation down, then, you know, we're going to have to deal with that possibly," she said.
Five of the Monetary Policy Board's nine members voted in favor of the increase on Tuesday, while the remaining four members voted to leave the cash rate target unchanged.
The Australian share market's benchmark index, the S&P/ASX 200, rose by 0.4 percent from 8,577 points prior to the RBA handing down the decision to 8,614.3 points at the close of trade on Tuesday.
The Monetary Policy Board will next meet in early May. The Australian Broadcasting Corporation reported that financial markets were pricing in a 30 percent chance of a third consecutive interest rate rise in May following Tuesday's decision. ■