Economy · August 3, 2022

Monetary Policy of Australia August 2022

At its August 2 monetary policy meeting, the Reserve Bank of Australia (RBA) raised the official cash rate (OCR) from 1.35% to 1.85%, as widely expected by the markets. In addition, the bank hinted at further tightening in the future.

The Bank has raised rates in an attempt to tame inflation, which is fueled by both external and internal factors. Prolonged global supply disruptions, a strained domestic labor market and strong domestic demand continue to exert upward pressure on prices. Inflation jumped to 6.1% in the second quarter and the Bank expects it to peak by the end of the year and then fall towards the target range of 2.0-3.0% in 2023, thanks to easing of constraints on the global supply side, stabilization of commodity prices and rising interest rates. Inflation is seen at 7.8% in 2022 as a whole, slightly above 4.0% in 2023 and around 3.0% in 2024.

The Bank maintained a hawkish tone in its statement, reiterating that it “expects to take further steps in the process of normalizing monetary conditions in Australia in the coming months”. However, he reiterated that he will conduct monetary policy “not on a predetermined path”, but guided by the evolving data and outlook for both inflation and the labor market.

Commenting on the release, UOB economist Lee Sue Ann said:

“We still expect the RBA to rise in the coming months, but the increases are likely to be slower and shallower. Our forecast remains that OCR will reach 2.10% by the end of the year and reach 2.50% by mid-2023. “

The next monetary policy meeting is scheduled for 6 September.

FocusEconomics speakers are still evaluating their predictions in light of the latest decision by the Reserve Bank of Australia.