Australia’s central bank, the Reserve Bank of Australia (RBA), raised interest rates by 25 basis points to 4.35% on November 7, 2023, the fourth consecutive rate rise. This is the highest level of interest rates in Australia since 2011.
The RBA is raising interest rates in an effort to combat inflation, which is currently at a 32-year high of 7.3%. The RBA is aiming to bring inflation back to its target range of 2-3%.
The RBA’s hawkish stance on inflation has been tempered by its concerns about the impact of rising interest rates on the economy.
The RBA has noted that the Australian economy is slowing down, and it is concerned that a too-rapid rise in interest rates could lead to a recession.
In its statement on November 7, the RBA said that it would “continue to assess the outlook and adjust monetary policy as needed.”
This suggests that the RBA is open to further rate rises, but that it is also willing to pause its rate-hiking cycle if the economy slows down too much.
The impact of the RBA’s interest rate hikes on the Australian economy is still uncertain. Some economists believe that the rate hikes will be enough to bring inflation under control without causing a recession.
Other economists believe that the rate hikes will lead to a recession, as they will make it more difficult for businesses and consumers to borrow money.
It is too early to say who is right. However, the RBA’s decision to temper its hawkish stance is a sign that it is aware of the risks of rising interest rates and that it is committed to a soft landing for the Australian economy.