The Reserve Bank of Australia (Central Bank) announced on the 1st that it will raise the benchmark interest rate by 25 basis points to 2.85%, while raising the interest rate on foreign exchange settlement balances by 25 basis points to 2.75%. This is the seventh time the RBA has raised interest rates this year.
After the outbreak of the new crown epidemic, the RBA has cut interest rates three times, reducing the interest rate to a historical low of 0.1%, but with the rising domestic inflation level, the RBA has continuously raised interest rates since May this year.
The latest data released by the Australian Bureau of Statistics at the end of last month showed that in the third quarter of this year, the Australian consumer price index (CPI) increased by 1.8% month-on-month and 7.3% year-on-year, the highest year-on-year increase since 1990. RBA governor Philip Lowe said the CPI could peak at 8 per cent later this year.
Philip Lowe said in his monthly monetary policy statement released on the same day that Australia’s sharp interest rate hikes since May are necessary to help the economy establish a more sustainable supply and demand balance and bring inflation back to target levels. In the coming period, the central bank is expected to further raise interest rates.
Continued interest rate hikes have had a significant impact on the Australian real estate market and household spending. The latest industry survey report shows that house prices in major Australian cities have fallen for six consecutive months; high inflation has exacerbated people’s concerns about the cost of living, and expectations of a central bank interest rate hike have further dragged down consumer confidence.
