Canberra, Sept. 6, (dpa-AFX/GNA) - The Reserve Bank of Australia (RBA) raised its key interest rates by a half-percentage point on Tuesday, in an attempt to bring inflation back to its 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%, the highest since late 2014.
Lowe said the board expects to increase interest rates further during the months ahead, but it is not on a preset 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 labour market, Lowe added.
The central bank also increased the interest rate on exchange settlement balances by 50 basis points, to 2.25%.
The board forecast inflation to be around 7.75% during 2022, a little above 4% during 2023 and around 3% in 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%.
GNA