Home > Latest News > Reserve Bank Lifts Cash Rate By 50 Basis Points, To 1.35%

Reserve Bank Lifts Cash Rate By 50 Basis Points, To 1.35%

The Reserve Bank has raised interest rates by 50 basis points, to sit at 1.35 per cent, in a bid to curb inflation.

This marks the third consecutive rise, and the second 50 point rise.

Philip Lowe, governor of the Reserve Bank, notes that further rises will come, stating “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 labour market.”

Lowe continued: “Global inflation is high. It is being boosted by COVID-related disruptions to supply chains, the war in Ukraine and strong demand which is putting pressure on productive capacity. Monetary policy globally is responding to this higher inflation, although it will be some time yet before inflation returns to target in most countries.

“Inflation in Australia is also high, but not as high as it is in many other countries. Global factors account for much of the increase in inflation in Australia, but domestic factors are also playing a role. Strong demand, a tight labour market and capacity constraints in some sectors are contributing to the upward pressure on prices. The floods are also affecting some prices.”

Lowe said the RBA has forecast inflation to peak later this year and then decline back towards the 2–3 per cent range next year.

“As global supply-side problems continue to ease and commodity prices stabilise, even if at a high level, inflation is expected to moderate. Higher interest rates will also help establish a more sustainable balance between the demand for and the supply of goods and services.”

The RBA notes that the Australian economy remains resilient and the unemployment rate was steady at 3.9 per cent in May, the lowest rate in almost 50 years.

“The Board will also be paying close attention to the global outlook, which remains clouded by the war in Ukraine and its effect on the prices for energy and agricultural commodities. Real household incomes are under pressure in many economies and financial conditions are tightening, as central banks increase interest rates. There are also ongoing uncertainties related to COVID, especially in China.

“Today’s increase in interest rates is a further step in the withdrawal of the extraordinary monetary support that was put in place to help insure the Australian economy against the worst possible effects of the pandemic. The resilience of the economy and the higher inflation mean that this extraordinary support is no longer needed.”


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