RBA hikes interest rates for first time in over two years, lifts cash rate to 3.85%; inflation to remain above target

The Reserve Bank of Australia has raised interest rates by 25 basis points to 3.85%, marking the first increase in over two years. This decision was driven by renewed inflationary pressures and stronger-than-expected domestic demand, with inflation expected to remain above target. Tight labour market conditions and elevated unit labour costs also contributed to the RBA's move.