Reserve Bank of Australia Makes First Interest Rate Increase Since 2010

For the first time in more than 10 years, Australia raised its interest rate.

Philip Lowe, governor of the Reserve Bank of Australia (RBA), said in a statement released today that the cash rate would be raised by 25 basis points to 0.35 percent, the first increase since November 2010.

Lowe also stated that the Board decided now is the appropriate moment to begin reducing some of the “exceptional monetary support” provided to Australia during the pandemic.

“The economy has proven to be resilient and inflation has picked up more quickly, and to a higher level, than was expected. There is also evidence that wage growth is picking up. Given this, and the very low level of interest rates, it is appropriate to start the process of normalizing monetary conditions,” the RBA governor further stated.

In his statement, Lowe admitted that inflation had risen faster than projected, while it remained lower than in most other industrialized nations.

“This rise in inflation largely reflects global factors. But domestic capacity constraints are increasingly playing a role and inflation pressures have broadened, with firms more prepared to pass through cost increases to consumer prices,” Lowe added.

Inflation is projected to rise more in the short term, but once supply-side disruptions are overcome, Lowe expects inflation to fall back to the country’s target range of 2 percent to 3 percent.

© Fourth Estate® — All Rights Reserved.
This material may not be published, broadcast, rewritten or redistributed.