Australia’s Reserve Bank Maintains Low Inflation Hike For The Second Month
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The Reserve Bank of Austria (RBA) has maintained its lowered interest rate increase for the second consecutive month. The bank, while revising its inflation outlook, noted that it would increase interest rates again to continue the battle against inflation.
The RBA, while concluding its November policy meeting, raised the cash rate by 25 basis points to a nine-year high of 2.85%.
The RBA To Maintain Inflation Level
The expected level of inflation has been kept at 8% this year, which is an increase from the previous forecast of 7.5%. It is still above the central bank’s 2%-3% target range.
RBA governor Philip Lowe, in a statement, noted that the board of the central bank wants to return to the inflation target range while maintaining balance in the company.
“The path to achieving this balance remains a narrow one and it is clouded in uncertainty,” Lowe added.
Chief economist at CommSec, Craig James, said the RBA has already made it known that it will maintain a ‘normal’ 25 basis point rate hike.
A 50 bp point in this case will be seen as a sledgehammer because it is riskier, and probably not the right approach to the situation.
Experts Call For A More Aggressive Measure
Rates have already surged by 275 basis points since May. As a result, the bank wanted to take a much slower approach to see how things turn out before considering a higher rate. According to the RBA, a higher interest rate hike would not be necessary if the inflation situation doesn’t go higher than expected.
The RBA had already admitted that the increased tightening was having a strong impact on consumer spending as the global financial crisis continues.
Despite the present situation, consumer spending in Australia has remained strong while the job market is still stable. This is coming even as the Australian inflation level has hit its highest in three decades. The increased level of inflation is the reason many economic experts are calling for a more aggressive stance on the interest rate hike to prevent a financial crisis. But the RBA has remained adamant so far.
The RBA was the first central bank among developed countries to opt for a much lower interest rate. The bank argued that a higher rate will put more pressure on the already financially-strained consumers.
