The key interest rate ranges from 0.1 to 0.35 percent. The turnaround in monetary policy is not good news for campaigning Prime Minister Scott Morrison.
Australia’s central bank has raised interest rates for the first time in more than a decade in response to rising inflation. On Tuesday, he raised it surprisingly from 0.1 to 0.35 percent. Most Reuters Surveyed analysts expect the increase to be only 0.25 percent. At the same time, monetary watchdogs have expressed interest in taking further interest rate hikes.
“We are committed to doing what is necessary to ensure that inflation in Australia returns to target levels over time,” said Reserve Bank Governor Philip Lowe. “This will require further interest rate hikes in the coming years.” The inflation rate reached 5.1 percent in the first quarter, the highest level in 20 years. After all, petrol, housing, food and education are all expensive.
Markets expect interest rates to rise to 0.75 per cent in early June and 2.5 per cent by the end of the year. By mid-2023, it will even rise to 3.5 percent. This will be the most aggressive Fed tight cycle in recent history. Higher interest rates can weigh on the purchasing power of consumers who have taken out a registered home loan.
To the Prime Minister Scott Morrison So a change in monetary policy is not good news. He is campaigning hard that polls suggest he could be fired on May 21. The rate hike means millions of Australians will have to find more money in their mortgages for the first time since 2010. Affordable credit has spurred housing boom over the past year. “The situation facing Australia is a situation facing the whole world,” Morrison said, referring to rising prices around the world. “I think Australians understand that.”
As inflation rises more than twice as fast as wages, real incomes are in the red. That puts pressure on Morrison’s Liberal-National Alliance, which has a one-seat majority in parliament. The center-left party is currently in the lead in the polls. The central bank last raised interest rates during the 2007 election campaign, after which Prime Minister John Howard lost the election.
(APA / Reuters)
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