Reserve Bank of Australia Governor Philip Lowe signaled on Tuesday (June 21) more interest rate hikes as the central bank strives to ensure that inflation returns to the target range over time.
“As we chart our way back to 2 to 3 percent inflation, Australians should be prepared for more interest rate increases,” Lowe said in a speech to the American Chamber of Commerce in Australia. “How fast we increase interest rates, and how far we need to go, will be guided by the incoming data and the Board’s assessment of the outlook for inflation and the labor market,” the RBA chief added.
Early this month, the RBA raised the cash rate by 50 bps to 0.85%. This was the first back-to-back rate hike in 12 years. Policymakers warned that further tightening is in the pipeline, with its size and timing being guided by the incoming data and the board’s view of the outlook for inflation and the labor market.
The minutes of the RBA’s June meeting showed that members discussed raising the cash rate target by 25 basis points or by 50 basis points. Members said both options would leave the cash rate below 1 percent, which would still be highly stimulatory and further increases would be required.