RBA lifts interest rates by 0.25 per cent

THE Reserve Bank of Australia (RBA) has again raised interest rated by 0.25 per cent, bringing the cash rate to 3.85 per cent.

A pause in the interest rate last month and easing of inflation had raised hopes the central bank could be towards the end of its hike cycle.

But the RBA board decided that economic indicators still showed unacceptable results and landed on the 25 basis point rise.

“The Board held interest rates steady last month to provide additional time to assess the state of the economy and the outlook,” Governor Philip Lowe’s statement read.

“While the recent data showed a welcome decline in inflation, the central forecast remains that it takes a couple of years before inflation returns to the top of the target range.”

Governor Lowe said the RBA board was pleased to see goods price inflation stabilise after resolution of pandemic-caused disruptions, but ongoing service price growth caused enough uncertainty for the board to act.

“The Board’s priority remains to return inflation to target.

“Medium-term inflation expectations remain well anchored, and it is important that this remains the case. Today’s further adjustment in interest rates will help in this regard.”

Latest RBA projections indicate inflation is set to shrink to about 4.5 per cent during this year and return to its target of 3 per cent by mid-2025. The Australian Bureau of Statistics recorded 7 per cent inflation in its latest figures for the year to March.

Governor Lowe indicated the RBA board would consider raising rates further if necessary to meet inflation targets.

“Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will depend upon how the economy and inflation evolve.

“The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that.”