Australia Hikes Rates By 50 Bps As Expected
(RTTNews) - The Reserve Bank of Australia raised its key interest rates by a half-percentage point on Tuesday to bring inflation back to the target and create a more sustainable balance of demand and supply in the Australian economy.
The policy board of the RBA, headed by Governor Philip Lowe, decided to lift the cash rate target by 50 basis points to 2.35 percent, the highest since late 2014.
Lowe said the board expects to increase interest rates further over the months ahead, but it is not on a pre-set path.
The size and timing of future interest rate increases will be guided by the incoming data and the Board's assessment of the outlook for inflation and the labor market, Lowe added.
The central bank also increased the interest rate on Exchange Settlement balances by 50 basis points to 2.25 percent.
The board forecast inflation to be around 7.75 percent over 2022, a little above 4 percent over 2023 and around 3 percent over 2024.
At the same time, the domestic economy is continuing to grow solidly and national income is being boosted by a record level of the terms of trade, the board observed.
It is possible that the Bank will only slow the pace of tightening if the third quarter inflation figures due at end-October show a moderation in price pressures, Marcel Thieliant, an economist at Capital Economics, said. Nonetheless, the RBA will ultimately lift the cash rate to 3.6 percent.
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