Inflation Pressures Persist, Prompting Rate Hike
The Reserve Bank of Australia (RBA) announced a further interest-rate increase on Tuesday, highlighting the persistence of inflation pressures in recent months. The official cash rate has been raised from 4.10% to 4.35%, marking the first hike since July.
RBA Governor Michele Bullock acknowledged that while inflation in Australia has passed its peak, it remains too high and is proving to be more persistent than previously anticipated. Bullock stated, “While the central forecast is for CPI inflation to continue to decline, progress looks to be slower than earlier expected.”
The RBA now projects that Consumer Price Index (CPI) inflation will reach approximately 3.5% by the end of 2024 and will hover at the top of the target range of 2% to 3% by the end of 2025.
RBA Outlier in Battle Against Inflation
The decision by the RBA to increase interest rates comes as a surprise, considering that many major central banks around the world have signaled their intent to curb inflation. The RBA’s move sets them apart from their counterparts who have suggested that they have done enough to tackle rising inflation.
RBA Governor Bullock justified the rate hike, stating, “The board judged an increase in interest rates was warranted today to be more assured that inflation would return to target in a reasonable timeframe.”
Economic Forecasts Coming Soon
On Friday, the RBA will release a full set of economic forecasts. This will provide further insights into the bank’s assessment of current and future economic conditions.
Continuing Rate Increases
This latest increase in interest rates is the 13th since the RBA began its rapid rate hikes in May 2022.