The Reserve Bank of Australia (RBA) has once again raised the cash rate, making it three months in a row that Australians have seen a rise in rates.
The RBA has lifted the cash rate by 50 basis points to 1.35 per cent.
RBA Governor Philip Lowe stated that “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”.
“Inflation is forecast 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”, Lowe continued.
In June, the RBA lifted the cash rate by 50 basis points, which was the highest rise since February 2002.
This came after an increase in May from 0.1 per cent to 0.35 per cent.
“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” Lowe stated.
Continuing, he said that “The Board expects to take further steps in the process of normalising monetary conditions in Australia over the months ahead. 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”.
Ben Udy, an economist at Capital Economics, predicts that this rate rise will be followed by another one in August.
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