Australian Reserve
The Reserve Bank of Australia decided on Tuesday to keep interest rates unchanged, and the highlights of the interest statement issued by the Monetary Policy Committee were as follows:
The Reserve of Australia has raised interest rates by 4 basis points since May last year. Higher interest rates establish a more sustainable balance between supply and demand in the economy and will continue to do so. In light of the uncertainty surrounding the economic outlook, the Reserve of Australia decided once again to keep interest rates steady this month. This will provide more time to assess the impact of the interest rate hike to date and the economic outlook. Inflation in Australia has passed its peak and the monthly CPI for July showed a further decline. However, inflation is still very high and will be for some time. While commodity price inflation has subsided, the prices of many services are rising rapidly, as has the rate of rental inflation. The central forecast indicates that CPI inflation will continue to decline and return within the target range of 2-3% in late 2025. The Australian economy is experiencing a period of below-trend growth and this is expected to continue for a while. High inflation affects the real income of workers, and household consumption growth is weak, as well as investment in housing. However, conditions in the labor market remain tight, although they have slowed down. As the economy and employment are expected to grow below trend, the unemployment rate is expected to gradually rise to around 4.5% late next year. Wage growth rebounded over the past year but remains consistent with the inflation target, provided productivity growth picks up. Returning inflation to the target level within a reasonable time frame remains a priority for the RBA. High inflation rates make life difficult for everyone and harm the performance of the economy, as it erodes the value of savings, harms household budgets, makes it difficult for companies to plan and invest, and exacerbates income inequality. If high inflation becomes entrenched in Schlen’s expectations, it will be very expensive to lower it later, implying higher interest rates and higher unemployment rates. So far, medium-term inflation expectations have been consistent with the inflation target and it is important that this remains the case. The latest data is consistent with inflation returning to the target range of 2-3% over the forecast horizon and with continued growth in output and employment. Inflation is declining, the labor market remains strong and the economy is operating at a high level of capacity utilization, although growth is slowing. There is high uncertainty about the RBA’s economic outlook. Inflation for services continues to be significant overseas and the same could happen in Australia. There are also uncertainties about delays in reflecting the impact of monetary policy changes and how companies respond to pricing and wage decisions and to slowing economic growth at a time when the labor market remains tight. The outlook for household consumption also remains uncertain, with many families experiencing painful strains on their finances, while some are benefiting from rising home prices, big savings, and rising high interest incomes. Globally, there is increasing uncertainty about the outlook for the Chinese economy due to ongoing pressures in the real estate market. Further tightening may be required to ensure inflation returns to target in a reasonable time frame, but this will still depend on data and a sophisticated assessment of risks. While making its interest rate decision, the RBA will continue to pay close attention to developments in the global economy, trends in household spending, and inflation and labor market prospects. The Reserve Bank of Australia remains firm in its determination to bring inflation back to its target level and will do what is necessary to achieve this.
2023-09-05 04:47:34
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