(Bloomberg) — Australia’s central bank increased interest-rates by more than economists had anticipated and signaled further hikes to come, reflecting a greater urgency to rein in surging inflation.

The Reserve Bank raised its cash rate by 25 basis points to 0.35%, citing accelerating consumer prices in a statement announcing Tuesday’s decision. This was the first time that borrowing costs were lifted during an election campaign for almost 15 years.

“The Board is committed to doing what is necessary to ensure that inflation in Australia returns to target over time,” Governor Philip Lowe said in a post-meeting statement. “This will require a further lift in interest rates over the period ahead.”

The Australian three year yields shot up 16 basis points to 2.928% after the announcement. It was the highest rate since April 2014! The announcement resulted in a 3.30% yield for ten years. Australian Dollar rose 1.4% to 71.4 US cents.

Australian policy makers have followed the global example of their counterparts by opting for an unexpectedly large increase in interest rates. Last month, the Bank of Canada and Reserve Bank of New Zealand both raised their rates by 50 basis points. The Federal Reserve will likely follow the example of the Bank of Canada and raise its rate this week.

The RBA’s hike is a blow to the center-right government, already trailing in opinion polls, as it campaigns for a rare fourth term in office at a May 21 election. The central bank’s decision is set to push up mortgage repayments for heavily indebted households at a time when they’re grappling with rising cost of living pressures amid still tepid wages growth.

Continue reading: Powell Leads Round of Interest Rate Hikes Worldwide

Also on the agenda Tuesday was the central bank’s plan for future bond maturities after it tripled its balance sheet to about A$650 billion to support the economy through the coronavirus pandemic. 

It was decided that the central bank would not reinvest any proceeds from bonds maturing in the coming months. In other words, it began a process of gradual quantitative tightening. Because only a handful of bonds have to mature by the end of next year, it is expected that the decision will not have much impact on the financial markets.

Lowe will be holding a press conference on Thursday, at 4 p.m. Sydney Time.

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