Reserve Bank raises interest rates for fourth-straight month – Michmutters

Reserve Bank raises interest rates for fourth-straight month

The Reserve Bank has increased interest rates for the fourth month in a row, raising its cash rate target by half a percentage point.

The RBA has now lifted its benchmark interest rate by 1.75 percentage points since its first rate rise in May, with the cash rate target sitting at 1.85 per cent.

In his post-meeting statement, Reserve Bank Governor Philip Lowe said the latest rate rise was unlikely to be the last this year.

“The board expects to take further steps in the process of normalizing monetary conditions over the months ahead, but it is not on a pre-set path,” he said.

“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 labor market.

“The board is committed to doing what is necessary to ensure that inflation in Australia returns to target over time.”

Woman in suit stands in front of Westpac corporate signage
Besa Deda is the chief economist for St George Bank and Westpac Business Bank.(ABC News: Daniel Irvine)

St George Bank chief economist Besa Deda said the Reserve Bank had already raised rates faster than any time since 1994, but she expected more.

“We think their cash rate could have a 3-handle on it by the end of this year, because inflation is running at its fastest rate since the early 1990s,” she told The Business.

“We are expecting that the Reserve Bank will deliver rate hikes for every board meeting until February next year.”

‘Real risk’ of recession

Mr Lowe acknowledged that it would be a difficult task.

“The board places a high priority on the return of inflation to the 2-3 per cent range over time, while keeping the economy on an even keel,” he warned.

“The path to achieve this balance is a narrow one and clouded in uncertainty, not least because of global developments.”

The managing director of EQ Economics and former ANZ Bank chief economist, Warren Hogan, warned that a recession was a “real risk” if the Reserve Bank raised interest rates too fast.

“I think they just need to be patient with this tightening cycle and try and get this inflation under control over a couple of years, rather than rush it and try and get it done within a year,” he cautioned.


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