RBA hikes rates by 50 basis points
The Reserve Bank of Australia (RBA) has lifted rates by 0.5 per cent for the fourth month in a row, as the pressure on mortgage holders continues to tighten.
The announcement made earlier today after its board meeting brings the cash rate target up to 2.35 per cent.
This comes after the majority of economists said they expected a 50-basis-point rise earlier this week, amid beliefs the RBA will relax the rate of increases in October.
The RBA said in its decision it is “committed to returning inflation to the 2 to 3 per cent range over time”.
“It is seeking to do this while keeping the economy on an even keel. The path to achieving this balance is a narrow one and clouded in uncertainty, not least because of global developments,” the statement said.
“The outlook for global economic growth has deteriorated due to pressures on real incomes from high inflation, the tightening of monetary policy in most countries, Russia’s invasion of Ukraine, and the COVID containment measures and other policy challenges in China.
“Inflation in Australia is the highest it has been since the early 1990s and is expected to increase further over the months ahead. Global factors explain much of the increase in inflation, but domestic factors are also playing a role. There are widespread upward pressures on prices from strong demand, a tight labour market and capacity constraints in some sectors of the economy.
“The further increase in interest rates today will help bring inflation back to target and create a more sustainable balance of demand and supply in the Australian economy. Price stability is a prerequisite for a strong economy and a sustained period of full employment.”
The RBA’s statement also said while it will continue to increase interest rates further 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”.
“The Board is committed to doing what is necessary to ensure that inflation in Australia returns to target over time.”
The interest rate on Exchange Settlement balances was also increased by 50 basis points to 2.25 per cent.
S o the inflation figures that the RBA are making their decisions on are based on the June 2022 figures….
Could you imagine a parent preparing to bath their young child…putting their hand into the water and going, “…nah, this water is a bit too cold…”
They then proceed to get three buckets of 50 liters of boiling hot water (July, August and September) and pour the July bucket into the bath…
Then, without any knowledge of how the interest rate increase has effected the economy….I mean, without any indication of how the 50 liters of boiling water has effected the overall temperature of the water, the parent (RBA) adds the 50 liter August and September buckets to the bath water…and bases this decision on the pre-July temperature.
What parent would put their child into this bath?
This is in effect what the RBA is doing. They have no idea what effect the July and August rate increases have had on the economies inflation rate, but they keep pouring the boiling hot water into the bath…
Why are the RBA NOT insisting on monthly inflation data on which to base their decisions. A prudent parent would be testing the water in between buckets to assess the effect of the bucket (interest rate change) on the water (economy)…
This is just reckless…