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Australia's central bank abandons pause option for Feb rate hike
CGTN
The Opera House and the Sydney Harbor Bridge at sunset, in Sydney,  Australia. /CFP
The Opera House and the Sydney Harbor Bridge at sunset, in Sydney, Australia. /CFP

The Opera House and the Sydney Harbor Bridge at sunset, in Sydney, Australia. /CFP

Australia's central bank, startled by the risk that inflation could prove stickier than previously thought, abandoned all thought of pausing at its February policy meeting and signaled more rate hikes would be needed in the months ahead.

The Reserve Bank of Australia's (RBA) Board settled on a quarter-point hike, which brought the cash rate to a fresh decade-high of 3.35 percent. That was a marked change from December when it had considered staying pat.

"The recent inflation data had suggested more breadth and persistence in inflation than had been expected and that strong demand was leading to price increases in some parts of the economy," according to minutes from its February 7 policy meeting.

"While inflation was expected to decline, there was a risk that it could persist at an uncomfortably high level, which would entail longer-term costs."

Board members agreed that further increases in interest rates are likely to be needed over the months ahead, consistent with market pricing.

Inflation is running at a 32-year high of 7.8 percent and is only expected to slow to the top of the RBA's target range of 2-3 percent by mid-2025. In particular, underlying inflation surprised the upside in the December quarter.

Data out on Wednesday could help decide how much higher rates would have to go, with wage growth seen picking up to a fresh eight-year high of 3.5 percent in the fourth quarter last year. The RBA expects wage growth to top 4.2 percent by the end of this year.

(Reuters with edits)

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