RBA Suprises Raising Rates to Ten Year High 3.85%, Warns on Further Tightening

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    Reserve Bank of Australia Governor Lowe

    Speaking at Australia’s National Press Club in Sydney.

    Decision to hold rates steady does not imply interest rate rises are over
    Board expects that some further tightening of monetary policy may well be needed
    Prudent to hold rates steady this month to allow more time to assess impact of past increases
    At our next meeting, we will again review the setting of monetary policy and updated forecasts
    Board is conscious monetary policy operates with a lag, of economic uncertainties
    Pause is consistent with our practice in earlier rate cycles
    Was common to move rates multiple times, then wait for a while and move again if necessary
    Increasingly clear higher interest rates are having an impact on household spending
    Wage outcomes have been consistent with inflation returning to target
    Recent high inflation has not been driven by excessive wages growth
    Inflation has not been driven by ever-widening profit margins
    While supply-side factors are influencing how fast inflation declines, they cannot be a reason to tolerate higher inflation on an ongoing basis

    Important for govt to return budget to balance over medium term
    Board prepared to have slightly slower return to inflation target than some other central banks
    Getting inflation down faster would lead to more job losses
    Not 100 percent certain will have to raise rates again
    If we hold rates in may, that does not mean we will not move later
    Premature to be talking about rate cuts
    Balance of risks lean toward further rate rises


    The Reserve Bank of Australia surprised with a 25-bps rate hike, lifting the cash rate to 3.85% to the highest level since May 2012. The consensus was
    [See the full post at: RBA Suprises Raising Rates to Ten Year High 3.85%, Warns on Further Tightening]

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