Australia’s Tenth Central Bank Rate Hike of the Current Tightening Cycle
March 7, 2023
The Reserve Bank of Australia’s Official Cash Rate was increased to a decade-high 3.60% from 3.25%, matching the 25-basis point increment size after the previous four policy reviews. The OCR had been cut in 2020 by a total of 75 basis points to 0.10% and was left at that low level until monetary tightening began in May of 2022. CPI inflation in Australia of 7.8% last quarter (most since early 1990) remains far above the targeted 2-3% corridor. However, the released statement drops hints that the rate level may be near its cresting point. “The monthly CPI indicator suggests that inflation has peaked in Australia. Goods price inflation is expected to moderate over the months ahead due to both global developments and softer demand in Australia.” For another thing, when laying out likely future policy changes, previous language that read, “the Board expects that further increases in interest rates would be needed…” was modified to “the Board expects that further tightening of monetary policy will be needed..” Beforehand, multiple additional increases were indicated, and the new wording could apply to a single further adjustment.
Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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