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Friday, January 27, 2023

Monetary policy: Central bank in Australia raises key interest rate for fourth consecutive month

Central Bank in Sydney

There is potential for further growth.

(Photo: Associated Press)

Cindy Australia’s central bank raised interest rates for the fourth month in a row due to high inflation. At the end of its monetary policy meeting in August, the Reserve Bank of Australia (RBA) raised its interest rate from 1.35% to 1.85%. By May it was still at 0.1 per cent. Thus the central bank implemented the most drastic interest rate turnaround since the early 1990s.

At the same time, he indicated that the end of the road has not yet been reached. “The Board expects to take more steps to normalize monetary conditions in the coming months, but the path is not yet set,” said Federal Reserve Chairman Philip Lowe. So far, financial markets have been signaled to bring interest rates down to a neutral level of at least 2.5 percent – ​​which, in theory, would neither stimulate nor slow economic growth.

Lowe’s has come under criticism for rapid growth. A tabloid asked him to step down. Lowe himself acknowledged that the bank was walking a “narrow path” between controlling inflation and maintaining a “balanced economy”. Treasury Secretary Jim Chalmers defended the independence of the central bank. At the same time, however, he ordered a review to determine whether it needed modernization.

At the same time, the central bank lowered its forecast for economic growth. According to this, Australian GDP will grow by only 3.25 per cent this year instead of 2.0 per cent in 2023 instead of the previously expected 4.2 per cent.

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Inflation is expected to rise to a high of 7.75 per cent. Only in 2024 should it return to the target range of 2 to 3 percent. Higher interest rates make loans for investment more expensive and thus can weigh on the economy. Also, inflation can be controlled.

More: The Bank of England is facing a huge interest rate hike

World Nation News Desk
World Nation News Deskhttps://worldnationnews.com/
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