RBA lifts interest rates to 1.85%
The Reserve Bank of Australia has lifted the official interest rate to 1.85 per cent.
Inflation in Australia has hit 6.1% year on year, which is the highest it has been since the early 1990s.
The driving factor that contributed to the cash rate increase in Australia is inflation, which has risen significantly and is likely to be higher than what was previously expected. This is as a result of the recent increases in prices for electricity, gas and petrol, in conjunction with other general cost of living increases.
Global factors, Covid-related disruptions to supply chains, and domestic issues have also contributed to the cash rate being increased.
As the Australian economy is expected to continually grow this year, the Board believes Inflation will peak towards the end of the year and then decline back towards 2-3 per cent.
It is believed rate hikes in May, June, July and August may be just a taste of what’s to come. It is projected that the RBA may continue to increase rates over the remainder of the year, in an effort to stabilise and eventually reduce inflation.
The Australian economy continues to be resilient. This is particularly evident in the labour market, with the unemployment rate declining further in June to 3.5 per cent, the lowest rate in almost 50 years. Both job vacancies and job ads are also at high levels and a further decline in unemployment rates is expected over the coming months.
The RBA is committed to doing what is necessary to ensure that inflation in Australia returns to target over time. This will require a further lift in interest rates over the period ahead.