RBA lifts interest rate to 0.85%
RBA lifts interest rate to 0.85%
After the board meeting today The Reserve Bank of Australia has lifted the official interest rate to 0.85 per cent.
It is the biggest single rate rise in 22 years and is a desperate attempt to clamp down on skyrocketing inflation.
Given the current inflation pressures in the economy, and the low interest rate level, the Board has decided to move by 50 basis points today, which is the largest monthly rate hike since February 2000.
Inflation is expected to increase further, but then reduce back toward 2-3 per cent range next year.
Due to the new interest rates, electricity and gas prices, as well as a recent increase in petrol prices, are likely to be higher than what was previously projected a month ago.
Today’s increase means that the RBA is withdrawing their extraordinary monetary support that was put in place to help the Australian economy during the pandemic.
It is particularly evident in the labour market, with the unemployment rate declining over recent months to 3.9 per cent which is the lowest rate in almost 50 years. Both job vacancies and job ads are also at high levels.
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. The Board will continue to closely monitor the incoming information and evolving balance of risks as it determines the timing and extent of future interest rate increases.
