SYDNEY (Reuters) - Australia's central bank decided to raise interest rates by a larger 50 basis points this month because policy would still be very stimulative and it needed to be normalised to stop high inflation becoming entrenched.

Minutes of its June 7 Board meeting, showed the Reserve Bank of Australia (RBA) discussed lifting the 0.35% cash rate by 25 basis points or 50 basis points and chose the latter as inflation had already outpaced all expectations.

"Members noted that both options would leave the cash rate below 1%, which would still be highly stimulatory, and that further increases would be required," the minutes showed.

"Members also agreed that further steps would need to be taken to normalise monetary conditions in Australia over the months ahead."

(Reporting by Wayne Cole; Editing by Himani Sarkar)