The Reserve Bank of Australia’s Governor Philip Lowe said on Friday that further increases in interest rates, though “unwelcome” for many people, are needed to bring inflation back to the 2-3 per cent target range.
Lowe made his remark at a public hearing when Australia’s House of Representatives Standing Committee on Economics probed the central bank’s recent interest rate policy, as well as its approach to tackling inflation, reports Xinhua news agency.
Knowing that higher rates are “unwelcome for many people, especially those who have borrowed large sums over recent times”, the Governor made clear in his speech that the bank board expects further rate rises, but the pace of increase may slow down at some point.
During the hearing, Lowe expounded on several global factors that drove up inflation in Australia, including the disruption of energy markets due to the Russia-Ukraine war, ripple effects of the Covid-19 pandemic on global supply chains, and domestic demand for goods being relatively high compared to the economy’s ability to meet it.
“Over the year to June, the headline inflation rate was 6.1 per cent. It is expected to increase further over the months ahead to peak at around 7.75 per cent later this year,” said Lowe.
“Inflation is then expected to start declining, to be back around 3 per cent late in 2024.”