Falling short of expectations, the Reserve Bank of Australia (RBA) surprised the market by raising interest rates by only 25 basis points compared to the 50 points projected by the market.
After concluding its October meeting, the RBA said interest rates had risen significantly in the short term, so it decided to slow the pace of movements.
This has made the central bank's official cash rate (OCR) rise to 2.60% following a 250 basis point increase since May.
Despite the smaller-than-expected increase, the RBA said it expects to continue raising interest rates this year as inflation remains well above its target range.
Governor Philip Lowe said inflation is likely to continue to rise in the coming months with expectations that it will soar to around 7.75% by the end of the year.
As a result, policymakers remain steadfast in their commitment to bring inflation to target and will do what is necessary to achieve it.
However, the size and timing of rate increases in the future will be determined by data and the prospect of inflation and the labor market.
In reaction to this decision, the Aussie dollar was down 0.7% at 0.6465 against the US dollar in the Asian session.
Like many other major currencies, the Aussie dollar has been under pressure due to aggressive US interest rate hikes that have boosted the greenback.
