Australia raises interest rate to 15-year high

Australia's central bank raised its key interest rate to a 15-year high on Tuesday, lifting the cash rate by 25 basis points to 4.6 percent as it sought to curb inflation.

The Reserve Bank of Australia cited the broadening Middle East conflict, high global energy prices and rising technology costs linked to artificial intelligence.

Economy minister Jim Chalmers said the main inflation factor was the re-escalation of the war in the Middle East.

"Australians are paying a very hefty price for that war in the Middle East, and today that price became a bit steeper," he said after the decision.

Reserve Bank Governor Michele Bullock said higher fuel prices were being passed through to other goods and services. She also said risks from the AI boom were building as investment in data centres increased demand for workers and materials.

The bank said AI-related demand was driving rapid growth in global prices for technology-related goods. It also said Australia's major trading partners were growing faster than expected as AI-related investment outweighed the negative effects of the Middle East conflict.

Tuesday's increase was Australia's fourth rate rise this year. Higher interest rates add pressure on households by increasing home mortgage payments.