The Reserve Bank of Australia (RBA) has warned Australians that more interest rate hikes are likely in the coming months as the bank seeks to manage inflation and ensure economic stability.
In its latest monetary policy announcement, the RBA said it “will do what is necessary” to keep inflation within its target range and maintain economic stability. This suggests the RBA is prepared to increase interest rates should inflation rise above the target range.
Inflation in Australia is currently sitting at 7.8%, its highest level since 1990 and above the RBA’s target range.
On Tuesday, the Reserve Bank of Australia (RBA) increased the cash rate by 25 basis points to 3.35 percent, marking its ninth consecutive rate hike since May of last year, and is widely expected to raise them again in the coming months.
The RBA Governor, Philip Lowe, has said he expects the interest rate hikes to have an impact on inflation in the medium term, but that it may take some time for this to be felt. The central bank is also monitoring the impact of the hikes on the economy, as higher interest rates can slow economic activity and increase unemployment.
The RBA also said that it was prepared to adjust monetary policy if necessary and that it would continue to monitor the effects of its actions. It also noted the Australian dollar has been appreciating against other currencies, which can help to reduce imported inflation.
It is expected the consumer price index will decline to 4.75 per cent in 2023 and to approximately 3 per cent by mid-2025, which would bring inflation back within the target range in the coming years.
The interest rates on mortgages and other loans for customers are determined by the cash rate set by the RBA, which directs the amount of interest banks must pay when borrowing money from each other.
