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RBA lifts rates by 50 basis points in July

Oksana Patron5 July 2022
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The Reserve Bank of Australia (RBA) has announced the increase of interest rates by 50 basis points.

The RBA board made its decision public following its meeting today stating it was increasing the cash rate target by 50 basis points to 1.35 per cent.

It also increased the interest rate on Exchange Settlement balances by 50 basis points to 1.25 per cent.

In the statement, the RBA said “global inflation is high”.

“It is being boosted by COVID-related disruptions to supply chains, the war in Ukraine and strong demand which is putting pressure on productive capacity. Monetary policy globally is responding to this higher inflation, although it will be some time yet before inflation returns to target in most countries.

“Inflation in Australia is also high, but not as high as it is in many other countries. Global factors account for much of the increase in inflation in Australia, but domestic factors are also playing a role. 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. Higher interest rates will also help establish a more sustainable balance between the demand for and the supply of goods and services.

“Medium-term inflation expectations remain well anchored and it is important that this remains the case. A full set of updated forecasts will be published next month following the release of the June quarter CPI.”

The RBA delivered its previous decision to increase interest rates, by 50 basis points to 85 basis points, on June 7, surprising the market with the size of the rate rise.

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