04 Oct 2022, 12:16

Australia hikes rates less than forecast, boosting stocks

SYDNEY, Oct 4, 2022 (BSS/AFP) - Australia raised interest rates less than
expected Tuesday, boosting stocks and dragging the local dollar lower, as
officials grow concerned about a slowing global economy sparked by rising
borrowing costs and surging prices.

While the Reserve Bank of Australia's 0.25 percentage point hike took the
cash rate to a nine-year high of 2.60 percent, the increase was half what had
been forecast as it joins others around the world in trying to rein in
runaway inflation.

In a statement the RBA noted it had already increased rates "substantially in
a short period of time", though it held its inflation estimate for the year
with a peak of 7.75 percent, before dropping to just over four percent in

"As is the case in most countries, inflation in Australia is too high," the
bank said in a statement.

It added that the surge in prices had been driven by "global factors", along
with strong spending levels in Australia.

The move highlights the tightrope central banks have to walk in trying to
bring down inflation while at the same time trying to cushion their economies
from a recession, a battle many commentators warn they are losing.

The Federal Reserve and European Central Bank have flagged further hikes at
their next meetings, while the United Nations warned that the tightening
programmes could trigger prolonged stagnation.

Sydney's ASX 200 soared 3.8 percent after the announcement, while the
Australian dollar dropped from US$0.6510 to as low as $0.6451 though it edged
back slightly.

City Index Senior Market analyst Matt Simpson said the decision was "telling"
after Australia had to "play catch-up with other central banks".

"Already that trajectory is dying down. And as long as medium-term inflation
expectations continue to behave, the case for a much higher cash is fading,"
he said.

Federal Treasurer Jim Chalmers said the rise and international warnings of
economic slowdowns would shape his upcoming budget announcement, which is due
in three weeks.

"The storm clouds are gathering again in the global economy," he told a news
conference in Canberra.

"There's no use pretending that the global situation hasn't deteriorated.

"There's no use pretending that rising inflation isn't punching a hole in
family budgets."


  • Latest News
  • Most View