The Reserve Bank of Australia on Tuesday hiked interest rates by another 25 bps to 3.85% after a pause last month. The decision shocked investors as the central bank claimed further tightening is needed to control inflation as it has passed the peak, but 7% is still too high.
Meanwhile, the European Central Bank (ECB) also expects to raise interest rates as inflation reaches 7% in the Euro Area. While the ECB was set to deliver a 25 bps rate increase in May, the bank may increase the rate by another 50 bps to control inflation and bring it to the 2% target.
Australia Looks for More Rate Hike to Control Inflation
The Board of the Reserve Bank of Australia on May 2 meeting decided to raise interest rates by 25 bps to 3.85%. The central bank also raised the rate paid on Exchange Settlement balances by 25 bps to 3.75%.
The hawkish stance caused the Australian dollar to rise while bond futures tumbled traders expect more pressure after Governor Philip Lowe revealed further tightening to being back inflation under the target range.
“Inflation in Australia has passed its peak, but at 7% is still too high and it will be some time yet before it is back in the target range. Given the importance of returning inflation to target within a reasonable timeframe, the Board judged that a further increase in interest rates was warranted today.”
The Australian labor market remained tight, with employment blowing past expectations in March and the unemployment rate at its lowest point in nearly half a century.
Meanwhile, the Consumer Price Inflation rate in the Euro Area slightly increased to 7% in April from a 13-month low of 6.9% in March. The ECB will likely increase interest rates by 25 bps this week to control inflation near the 2% target.
The global crypto and stock markets remain under pressure as the US Fed also decides its key rate hike on May 3 amid the banking crisis and the debt ceiling crisis. Traders await Fed Chair Jerome Powell’s stance for guidance on the rates in the coming months.
Also Read: Bitcoin Price Breaks Key Level, Risks Falling To $26K Ahead US Fed Rate Hike?
Crypto Market Remains Subdued
The crypto market remains subdued with low trading volumes across all major cryptocurrencies. Bitcoin price currently trades at $28,087, down 2% in the last 24 hours.
Whereas, Ethereum price trades near the $1,800 level. The crypto market continues to be under pressure amid major events this week.
Also Read: Litecoin Creator Predicts Massive Post-Halving LTC Price Rally
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