The Reserve Bank of Australia (RBA) met market expectations by raising its interest rate by 25 basis points to 3.60% at its March policy meeting.
Here are some key words taken from the meeting.
The central bank is still determined to return inflation to the target.
Policy makers further tightening of monetary policy will be required.
Consumer price index (CPI) indicators show inflation has peaked in Australia.
Service price inflation remains high, following strong demand throughout the summer.
Policymakers are trying to return inflation to the 2-3% target without impacting the economy.
The chance to avoid recession is still small.
Australia's economic growth is starting to slow.
There is uncertainty about the timing and extent of the slowdown in household spending.
The labor market remains tight although conditions have eased slightly.
Wage growth continued to pick up in response to a tight labor market and higher inflation.
Recent data shows a lower cyclical risk between price and wage increases (wage-spiral).
But the RBA remains wary of wage-spiral risks, given the limited spare capacity in the economy and the lowest unemployment rate in history.
Following the above statement, the market interprets it as less hawkish where the RBA sees inflation in Australia has peaked.
Interest rates will likely continue to rise, but perhaps at the current rate of increase or less.
Meanwhile, the Aussie dollar showed a significant drop in initial reaction to the decision.
** Wage-spiral : An increase in wages increases the demand for goods thus causing prices to soar. But, when prices rise, it will push for higher wages, eventually creating a spiral in wages and inflation.
