Further increase is likely to follow this.
(Photo: AP)
Sydney Australia’s central bank has raised interest rates for the fourth consecutive month in the face of high inflation. At the end of its monetary policy meeting in August, the Reserve Bank of Australia (RBA) raised its interest rate from 1.35 to 1.85 percent. As of May, it was still at 0.1 percent. The central bank returned to the tightest interest rate hike since the early 1990s.
At the same time, she signaled that this was not the end of the road. “The Board expects additional steps to normalize monetary conditions in the coming months, but the path is not yet mapped out,” Federal Reserve Chairman Philip Lowe said. So far, financial markets have been signaled to bring interest rates down to a neutral level of at least 2.5 percent — where, in theory, economic growth can neither be stimulated nor slowed.
Lowe has come under fire for the rapid increase. A tabloid called for him to relinquish his post. Lowe acknowledged that the bank was walking a “short cut” between controlling inflation and maintaining a “balanced economy.” Treasury Secretary Jim Chalmers defended the central bank’s independence. However, at the same time, he ordered a review to determine whether modernization was necessary.
At the same time, the central bank lowered its forecasts for economic growth. According to this, Australian GDP will grow by only 3.25 per cent this year instead of the previously expected 4.2 per cent, and only 1.75 per cent in 2023 instead of 2.0 per cent.
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The inflation rate is expected to rise to a maximum of 7.75 percent. Only by 2024 should it return to the 2 to 3 percent target range. Higher interest rates make borrowing for investments more expensive, thus weighing on the economy. At the same time inflation can be controlled.
Further: The Bank of England faces a major interest rate hike
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