SYDNEY (Reuters) – The Reserve Bank of Australia expects to raise interest rates further over the coming months, the deputy governor said on Tuesday, noting that the bank can achieve a similar tightening in rates to its global peers through smaller hikes.
Speaking at 2022 AFIA Conference in Sydney, Michele Bullock said the move of 25 basis points in October was due to the economic circumstances at home and the fact that the central bank board meets more frequently than most of its counterparts for 11 times a year.
“This is a particular advantage in uncertain times, as it allows more frequent evaluation of the evidence and recalibration if necessary,” said Bullock.
“It also means that if we increase interest rates at every meeting, we can potentially move much faster than overseas central banks.”
The RBA has already lifted its cash rate by 250 basis points to 2.6% since May and surprised markets earlier this month with a smaller-than-expected 25bp increase following four outsized moves of 50bp.
“The Board expects to increase interest rates further over coming months. But the pace and timing will be determined by the economic data,” Bullock said.
She said the Board was concerned about how household spending will respond to the successive hikes and price inflation, while the international economic environment has also deteriorated sharply.
Inflation ran at a 21-year high of 6.1% in the June quarter and is thought to have accelerated to 6.9% in the September quarter.
Surging inflation and expectations for further aggressive policy action from the U.S. Federal Reserve and other central banks have led markets to wager rates in Australia will have to rise to around 4%, while many analysts are forecasting a peak between 2.85% and 3.6%.
“Our policy rate trajectory has been as steep, or steeper, than other central banks,” said Bullock.
(Reporting by Stella Qiu; Editing by Kim Coghill & Shri Navaratnam)