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The Reserve Bank of Australia (RBA) continues its efforts to curb inflation by raising its cash rate by another 0.5% to 1.35% at its board meeting on July 5.
of statement RBA Governor Philip Lowe, announced after the meeting, said central bank movements were needed to end the non-traditional monetary policy that followed the COVID-19 pandemic.
“Today’s rising interest rates are another step in the withdrawal of special financial support implemented to secure the Australian economy from the worst effects of the pandemic,” he said.
“The resilience of the economy and higher inflation mean that this special support is no longer needed.”
Later, Mr Rowe added that the Reserve Bank of Australia’s board is likely to take “further steps” in the coming months to bring Australia’s financial situation back to normal.
“The magnitude and timing of future interest rate hikes will be guided by incoming data and the Board’s assessment of inflation and the outlook for the labor market,” he said.
The next cash rate hike was expected to be in August after the second quarter inflation data was released.
Domestic factors boost inflation in Australia
The governor talked about the economic situation in Australia, where inflation is high but not at the levels seen in other countries.
In addition, while global factors were many of the causes of rising inflation in the country, domestic factors such as strong demand, tight labor markets, and capacity constraints in some sectors were increasing pressure.
“Inflation is expected to peak later this year and fall towards the 2-3 percent range next year,” Rowe said.
“Inflation is expected to ease, even at high levels, as global supply-side problems continue to ease and commodity prices remain stable.”
On the other hand, the rise in cash rates was in line with what economists and markets had previously expected.
“The RBA probably goes beyond taking a’waiting’approach to the effects of rising cash rates and needs to keep raising interest rates until inflation is comfortable, so further cash rate hikes could be announced. Highly sex. Anneke Thompson, Chief Economist at Creditor Watch, said:
A “Tough Day” for Homeowners with Mortgages
Earlier, Finance Minister Jim Charmers warned Australians of a “severe day” as interest rate hikes squeeze into households.
“Most of the households that are already growing due to the prices of gasoline, groceries, electricity and other necessities will be exhausted by mortgage repayments.” He told sky news..
“People will find today’s news really difficult. For many homeowners, this will be a tough day.”
The financial comparison website RateCity estimates that if interest rates rise by 0.5%, homeowners with $ 500,000 in mortgages will pay an additional $ 137 a month.
At the same time, finance officials said the RBA’s decision would put more pressure on the federal budget and economy.
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Alfred Bui is a Melbourne-based Australian reporter with a focus on local and business news. He is a former small business owner and holds two master’s degrees in business and business law. Contact him at [email protected].
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