Under the new governor Michele Bullock, the Reserve Bank of Australia (RBA) is contemplating further interest-rate hikes to manage inflation, following deliberations in their October 3 board meeting. The potential increase in the cash rate by 25 basis points is driven by concerns that elevated gasoline prices could hinder efforts to control inflation.
The RBA has been committed to swiftly returning inflation to its target range of 2%-3%. This commitment was evident in a substantial 400 basis point rise in the official cash rate, which was implemented over a period ending in June 2023. Since then, the cash rate has remained steady at 4.10% for four consecutive months following the October meeting. This holding pattern is based on the expectation that the full impacts of previous hikes will take time to manifest.
Future adjustments to the official cash rate will be informed by upcoming economic data. Notably, the RBA will pay close attention to August's automotive fuel inflation, which stood at a high 14%. The bank's decision-making process is expected to factor in these inflation figures as it continues its efforts to manage and control inflation under its new leadership.
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