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Bank of Australia raises interest rates by 0.5% and signals further increases to curb inflation

The Reserve Bank of Australia (RBA) raised interest rates by 0.50% to 1.35% at its meeting today, as expected. At the same time, it signaled that it will continue to tighten monetary policy in order to curb the sharp rise in inflation.

The RBA stated that monetary easing is no longer necessary to support the economy. In view of the strengthening domestic economy, the RBA will have to tighten its monetary policy further in the coming months.

The RBA recently released the minutes of its June meeting. They state that the RBA’s monetary policy remains very accommodative and that the RBA needs to normalize its policy in order to contain inflation at present.

The RBA governor said that price pressures were continuing both internationally and domestically. Australian inflation is likely to reach 7% by the end of the year. The 7% inflation is the highest in decades and is above the RBA’s long-term target of 2-3%.

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