Central Bank Rate Decisions in Kyrgyzstan and Australia

March 1, 2022

The National Bank of Kyrgyzstan increased its policy rate by 150 basis points to 10.0%, which is exactly double the level prior to February 2021 and at a six-year peak. The previous increase of 50 bps was done in January. A 10% the policy rate still remains a tad below on-year CPI inflation in that country, and officials expect inflation to go somewhat higher before they crest. More rate increases this year seem probable.

After its second scheduled policy review of 2022, the Reserve Bank of Australia Board left its Official Cash Rate unchanged at a record low of 0.10%, which has been the level since a 15-basis point cut in November 2020 capped 65 basis points of easing that year. Governor Lowe’s statement today concedes that the war between Russia and Ukraine injects a fresh uncertainty whose inflationary impact is tilted to the upside, but he also defends the patient posture of the current policy stance and defends not raising rates just yet.

While inflation has picked up, it is too early to conclude that it is sustainably within the target range. There are uncertainties about how persistent the pick-up in inflation will be given recent developments in global energy markets and ongoing supply-side problems. At the same time, wages growth remains modest and it is likely to be some time yet before growth in labor costs is at a rate consistent with inflation being sustainably at target. The Board is prepared to be patient as it monitors how the various factors affecting inflation in Australia evolve.

Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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