Reserve Bank lifts cash rates 0.5 basis points to 1.35%

In the meeting today, RBA has decided to increase the cash rate for a third consecutive month by 50 basis points to 1.35%. RBA improved the interest rate on Exchange Settlement balances by 50 basis points to 1.25%, driven by the COVID-19 related challenges in the supply chain, and Russia-Ukraine war.

The increase in the cash rate target is an addition step in the direction of withdrawing the extraordinary monetary funding to aid the Australian economy during the pandemic.

The Australian economy has proven to be robust. In May 2022, the unemployment rate was steady at 3.9%, which is the lowest rate in almost 50 years. The board also anticipates that inflation to peak later this year and then after decline back towards in the range of 2–3% next year. As global supply difficulties continue to ease as well as commodity prices stabilize, inflation is anticipated to moderate even if at a high level.

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