RBA hikes rates by another 50 basis points

7 September 2022
| By Staff |
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The Reserve Bank of Australia (RBA) has lifted interest rates by 0.5 percentage points, taking the cash rate target up to 2.35%.

The hike is the fourth in a row from the RBA, which – like central banks around the world – is tightening policy in a bid to bring inflation under control.

The consumer prices index stood at 6.1% for the June 2022 quarter, according to the Australian Bureau of Statistics, which is a three-decade high and well above the RBA’s target.

RBA governor, Philip Lowe, said: “The board is committed to returning inflation to the 2–3 per cent range over time. It is seeking to do this while keeping the economy on an even keel.

“The path to achieving this balance is a narrow one and clouded in uncertainty, not least because of global developments. The outlook for global economic growth has deteriorated due to pressures on real incomes from high inflation, the tightening of monetary policy in most countries, Russia's invasion of Ukraine, and the Covid containment measures and other policy challenges in China.

“Inflation in Australia is the highest it has been since the early 1990s and is expected to increase further over the months ahead. Global factors explain much of the increase in inflation, but domestic factors are also playing a role. There are widespread upward pressures on prices from strong demand, a tight labour market and capacity constraints in some sectors of the economy.”

The RBA expects Australian inflation to peak later this year then fall back towards the 2-3% range as global supply bottlenecks are resolved, commodity prices come down and rising rates take effect.

The central bank also increased the interest rate on exchange settlement balances by 50 basis points to 2.25 per cent.

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Submitted by Charz on Wed, 2022-10-05 10:56

Well written Mike, the RBA needs to think much broader than just inflation pressures, but rather the course of the ever increasing rate rises to curb inflation isn't working. The basket of goods used to determine inflation, is primarily non-luxury items, but just 'core' living / surviving expenses and not on major 'luxury' items, as mentioned by Mike.
The question remains - will the RBA Board stop on been bullish with rate hikes?

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