The Australia’s Reserve Bank Board members held their Monetary Policy Meeting on September 20, 2022 to discuss the global inflation trends. The Board of Directors voted to raise the cash rate target by 50 basis points, to 2.35 percent. The interest rate on Exchange Settlement balances was also raised by 50 basis points to 2.25 percent.
The RBA interest rate forecast is due to inflationary pressures which were weighing on families’ real earnings and attitude, and the quick rise in interest rates would add to the pressure on aggregate consumer disposable income. With the exception of Europe, recent statistics revealed that headline inflation has stopped growing in the majority of economies.
However, underlying inflation remained strong, making it premature to infer that this reflected a trend shift. Also the RBA Monetary Policy meeting pointed out that, upstream pricing pressures had continued to ease, and supplier delivery times had crept closer to pre-pandemic norms.
Shipping costs have also dropped in recent months. Services inflation, on the other hand, was still growing, and wage growth in certain countries was stronger than would be consistent with inflation returning to goal.
Other things discussed in the RBA meeting include;
- Impact of inflation on interest-rate sensitive sectors.
- Energy availability in Europe which has become a critical issue
- Surging business costs
- Recovering Chinese economy which is facing headwinds in the real estate sector.
- High coal and goal prices supporting Australia’s Terms of Trade at record levels.
- Timely indicators point to inflation remaining high.
- Household spending held up in September.
- Strong labor market conditions
- Declining housing prices.
- International financial markets.
- Review of bond purchase program
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