The Reserve Bank of Australia raised the base rate by only 25 bps

The Reserve Bank of Australia (RBA) unexpectedly reduced the pace of tightening its monetary policy, noting a deterioration in the global economic outlook. This time, the regulator raised the interest rate by only 25 basis points, to 2.6%. Most analysts expected an increase of 50 bps.

Recall that the RBA raised the rate by 50 bps in June, July, August and September in an attempt to slow down inflation, which may peak by the end of 2022 at about 8%.

«One of the sources of uncertainty is the prospects for the global economy, which have worsened recently,» said the head of the Australian Central Bank, Philip Lowe.

In addition, the RBA fears that the tightening of financial conditions will have negative consequences for consumer budgets and spending.

Earlier, the Australian central bank has already stated that it intends to slow down the pace of rate hikes at some point, as it expects a rapid weakening of inflation in 2023 along with falling commodity prices.

The Australian dollar reacted with a decline to the news about the rate: the AUD/USD pair fell to $0.6470 during trading on Tuesday, compared with $0.6514 at the close of the previous session.