SYDNEY: The Australian central bank revised its inflation forecast and raised the interest rate by 25 basis points on Tuesday, indicating further tightening would be needed.

At the conclusion of its November policy meeting, the Reserve Bank of Australia (RBA) raised its cash rate for the seventh time in as many months to a nine-year high of 2.85%.

After four consecutive moves of 50 basis points, it saw a quarter-point rate hike last month, which surprised many in the markets and cited an already significant increase in rates.

Also Read: Saudi Arabia claims a $40 billion budget surplus for the first nine months of 2022

The board expects further hike in interest rates in the coming years. It is closely watching household spending, wage and pricing behavior, and the global economy, according to RBA Governor Philip Lowe.

The Board acknowledges that monetary policy has been delayed and that mortgage payments have not yet fully benefited from the rise in interest rates. The RBA now predicts that inflation will be around 8% later this year, up from its previous forecast of 7.75%.

Following the rate decision, the local dollar dropped 30 ticks, and the markets have lowered the expected peak of cash rates to around 3.9%.

Also Read: Hong Kong is eligible to become a hub for global fintech

The RBA wanted to slow down and see how the tough tightening was affecting consumer spending, against a backdrop of increasing global uncertainty, as rates had already increased by 275 basis points since May.

But consumer spending continues, the labor market remains tight, and Australian inflation hit a 32-year high last quarter, a shocking result that has increased pressure on the RBA to resume more aggressive rate hikes.

The layoffs meant the layoff, a closely watched indicator of core inflation released last week, rose 6.1% from a year ago, higher than the RBA's prediction that it would peak at 6.0% in the fourth quarter. The bank's most recent economic projections will be updated on Friday.

Also Read: Jack Dorsey to launch new social media platform after Twitter sold

Consumer confidence dropped for the fifth straight week last week, according to an ANZ survey released on Tuesday, while inflation expectations rose to their highest level in more than a decade.

According to David Planck, head of Australian economics at ANZ, "cost of living concerns and expectations of additional rate hikes by the RBA have fueled confidence in the fall to levels last seen during the initial weeks of the COVID lockdown."