The Reserve Bank of Australia (RBA) has lifted the cash rate by another 0.5 percent to 1.35 percent at its board meeting on July 5, continuing its effort to bring inflation under control.
“Today’s increase in interest rates is a further step in the withdrawal of the extraordinary monetary support that was put in place to help ensure the Australian economy against the worst possible effects of the pandemic,” he said.
“The resilience of the economy and the higher inflation mean that this extraordinary support is no longer needed.”
Lowe then added that the RBA board was likely to take “further steps” in the upcoming months to bring the monetary conditions in Australia back to normal.
“The size and timing of future interest rate increases will be guided by the incoming data and the board’s assessment of the outlook for inflation and the labour market,” he said.
Domestic Factors Drive Up Australia’s Inflation
Speaking about the economic situation, the governor said that although inflation in Australia was high, it had not reached the levels seen in other countries.’Additionally, while global factors were responsible for much of the rise in inflation in the country, domestic factors such as strong demand, a tight labour market, and capacity constraints in some sectors were adding to the pressures.
“Inflation is forecast to peak later this year and then decline back towards the two to three percent range next year,” Lowe said.
“As global supply-side problems continue to ease and commodity prices stabilise, even if at a high level, inflation is expected to moderate.”
![Reserve Bank Governor Philip Lowe speaks at Parliament House in Canberra, Australia on Feb. 7, 2020. (Tracey Nearmy/Getty Images)](/_next/image?url=https%3A%2F%2Fimg.theepochtimes.com%2Fassets%2Fuploads%2F2021%2F11%2F16%2FGettyImages-1204498095-600x397.jpg&w=1200&q=75)
Meanwhile, the lift in the cash rate was in line with what economists and markets had expected earlier.
A ‘Tough Day’ For Homeowners With Mortgages
Earlier, Treasurer Jim Chalmers had warned Australians of a “tough day” as the interest rate hike would bite into household budgets.“People will find today’s news really difficult. I think it will be a tough day for a lot of homeowners.”
Financial comparison website RateCity estimated the 0.5 percent increase in interest rate would cause a homeowner with a $500,000 (about US$343,000) mortgage to pay an additional $137 a month.
At the same time, the treasurer said the RBA’s decision would put more pressure on the federal budget and the economy.