The Reserve Bank of Australia has raised interest rates for the third time in a row. Brock hinted at hitting the "pause button."

On Tuesday, the Reserve Bank of Australia (RBA) raised interest rates for the third consecutive time, in line with market expectations. RBA Governor Michelle Bullock hinted that policymakers will pause rate hikes to assess their next steps. The RBA's nine-member policy committee voted 8-1 to increase the cash rate from 4.1% to 4.35%, completely reversing last year's loose monetary policy cycle. This aggressive tightening measure highlights the RBA's determination to curb persistently high inflation and solidifies its stance as a standout among global counterparts. Bullock told reporters that the rate hike gives the RBA space to decide its next move, as policymakers monitor whether inflation expectations will remain stable. She stated, "One of the reasons for raising rates is to give ourselves time to observe developments. We believe that now we have enough room to be vigilant about both upside and downside risks to inflation." After Bullock's speech on Tuesday, traders lowered their expectations for further rate hikes. The market expects the RBA to only raise rates once in the third quarter. However, before the press conference, the possibility of two more rate hikes before the end of the year was close to 60%. Stubborn inflation has prompted the RBA to raise rates again The RBA's tightening policy contrasts sharply with counterparts such as the Bank of Japan and the Federal Reserve, who have remained on hold citing uncertainty from the war. The US-Iran conflict led to the closure of the Strait of Hormuz, a vital passage connecting the Persian Gulf with global markets. The strait transports around one-fifth of global oil and liquefied natural gas, causing energy prices to soar. Australian Treasurer Jim Chalmers said in a statement, "Our economy already faces inflation issues, and the Middle East war has exacerbated this issue. We expect its impact to continue for some time. The duration and severity of this conflict will determine how much pressure it puts on global inflation, and what impact it will have on economic growth." According to the RBA's latest quarterly economic forecast report, rising borrowing costs and surging gasoline prices will lead to a slowdown in economic growth and an increase in unemployment. Core inflation is expected to remain above the RBA's target range of 2-3% this year and next. According to their latest forecast, the cash rate will peak at 4.7% during the forecast period. In February's forecast, the cash rate was projected to reach a high of 4.3% in December 2027. The RBA pursues a dual mandate, striving to keep inflation within the target range's midpoint (2.5%) while also working towards maintaining the economy at its maximum sustainable employment level.