what was the interest rate rise today - Causes and solutions

what was the interest rate rise today, At its meeting today, the Executive Board decided to raise the target interest rate by 25 basis points to 2.60%.

It also increased the interest rate on exchange rate balances by 25 basis points to 2.50%.

what was the interest rate rise in today's analysis?

The Governing Board aims to bring inflation back to the 2% to 3% range over time.

Today's rate increase will help achieve this goal, and further increases will likely be needed in the near term.

The key interest rate was raised substantially within a short period. In light of this, the Board decided to raise the policy rate by 25 basis points this month as it assesses the outlook for inflation and economic growth in Australia.

As in most countries of the world at the moment, inflation rates here in Australia are quite high. Much of this high inflation is due to global factors, but strong domestic demand relative to the economy's ability to meet that demand also plays a role.

inflation expectations Australia

Inflation is expected to rise further in the coming months before then falling back to the 2 to 3 per cent range.

Applying the expected moderation methods in solving inflation problems before the beginning of next year is the lasting solution to the problems of the global supply side, and the recent decline in some commodity prices may work. The rise in interest rates may also affect.

Medium-term inflation expectations remain well anchored, and this must continue to be the case. The Bank's central forecast CPI sees inflation at around 7¾ per cent in 2022, just over 4 per cent in 2023, and around 3 per cent in 2024.

The Australian economy continues to grow solidly, and national income is being boosted by record-high terms of trade. The labour market is very tight and many companies are struggling to hire workers. The unemployment rate was 3.5% in August, the lowest level in almost 50 years.

Both the number of job vacancies and the number of job advertisements are very high, which suggests that unemployment will continue to fall.

Wage growth continues to pick up after the low rates of recent years, although it remains lower than in other advanced economies where inflation is higher.

Given the tight labour market and upstream price pressures, the Executive Board will continue to closely monitor both labour cost developments and firms' pricing behaviour in the period ahead.

how to maintain price stability

Price stability is a prerequisite for maintaining a strong economy and an excellent sustainable period of full employment. Against this background, the Executive Board's priority is to bring inflation back into the 2-3% range over time.

It is committed to achieving this while keeping the economy in balance. The path to achieving this equilibrium is narrow and fraught with uncertainty.

One of the main reasons for the uncertainty is the negative outlook for the global economy, which has deteriorated significantly at the moment.

Another is how household spending in Australia will respond to tighter financial conditions.

Higher inflation and interest rates are weighing on households, although the full impact of higher interest rates on mortgage payments has yet to be felt. Consumer confidence has also fallen, and housing prices are down after earlier sharp increases.

In the meantime, people are looking for other jobs and working longer hours to provide higher wages.

While many families have turned to build large financial stores, the savings rate is now still higher than it was before the beginning of the pandemic.

how does raising interest rates help inflation

• Raising interest rates further today will help create a more sustainable balance of supply and demand in the Australian economy. This is what is really needed to reduce inflation. The Board expects to continue to raise interest rates in the period ahead.

• Now she is closely monitoring the movement of the world economy, and household spending, and also monitors the behaviour of wage setting and price indicators. The size and timing of future rate increases will continue to depend on incoming data and the boa.

• The Board remains committed to returning inflation to target and will take all necessary steps to achieve this.