RBA Holds Interest Rates Steady as It Assesses Impact of Previous Increases
The Reserve Bank of Australia (RBA) has decided to keep interest rates unchanged at 4.1% for the second consecutive month, citing the need for more time to evaluate the effects of previous rate hikes. The central bank has raised rates by a total of 400 basis points since May last year, reaching the highest level in 11 years.
One of the factors driving this decision is the country’s inflation rate. While inflation slowed to 6% in the second quarter, down from 7% in the first quarter, it still remains well above the RBA’s target range of 2% to 3%. This concerning level of inflation has prompted the RBA to exercise caution and maintain the current interest rates.
RBA Governor Philip Lowe stated that the higher interest rates are working to establish a more balanced supply and demand in the economy and will continue to do so. Given the uncertainty surrounding the economic outlook, the RBA has opted to hold rates steady to allow for further assessment of the impact of the previous rate increases on the economy.
Australia has been grappling with surging inflation as economic activity picked up after the peak of the Covid-19 pandemic. Lowe highlighted that while goods price inflation has eased, the prices of many services are rising at a brisk pace. Rent inflation is also elevated, contributing to the overall inflationary pressure.
The central bank’s forecast indicates that CPI inflation is expected to continue its decline and reach around 3.25% by the end of 2024. It is projected to return to the target range of 2% to 3% by late 2025.
Notably, this policy meeting marks Governor Philip Lowe’s penultimate meeting, as his seven-year term is set to conclude on September 17. Michele Bullock is expected to succeed him as the next governor of the RBA.
This news is still developing, and further updates will be provided as more information becomes available.