[Source: Reuters]

Australia’s central bank on Tuesday raised interest rates to a 10-year high and stuck with its projection that more hikes are needed, a stance taken as slightly hawkish by markets that were looking for signs of a pause in the near term.

Wrapping up its last policy meeting this year, the Reserve Bank of Australia (RBA) lifted its cash rate by 25 basis points to 3.1%, the eighth hike in as many months and bringing its rate increases to a hefty 300 basis points since May.

All 30 economists polled by Reuters had expected the RBA to go for another modest 25 basis point hike, its third in a row after a sucession of half-point hikes.

In a statement largely similiar to others of recent months, Governor Philip Lowe said the central bank’s board expects to increase interest rates further over the period ahead, although it is not on a pre-set course.

“The size and timing of future interest rate increases will continue to be determined by the incoming data and the Board’s assessment of the outlook for inflation and the labour market.”

Some economists had been looking for a change in the forward guidance by the central bank this time. A top central banker said in November that the board was nearer to the point where it might pause on rates.

However, the most aggressive tightening cycle in decades will pause at least until February, when the central bank next meets on policy after a year-end break, giving it time to assess the impact of the hefty cumulative increase in rates.

After the policy decision was released, the local dollar edged up to $0.6735, reflecting the slightly less dovish tone in the statement than markets had been looking for.

Markets have priced in more chances of a hike in February and nudged up the expected peak for interest rates to around 3.6% by July next year, from 3.5% before the decision.