RBA Bullock: Sharp Deterioration In Global Econ Environment One Reason For 25bps In Oct

By Sophia Rodrigues

(Sydney, October 18, 2022)—A sharp deterioration in international economic environment was one of the reasons the Reserve Bank of Australia decided a smaller cash rate increase of 25 basis was warranted in October.

The RBA’s deputy governor Michele Bullock made the comment in a speech at the AFIA Annual Conference titled, “Policymaking at the Reserve Bank.”

Among other reasons was the view that household budgets were coming under pressure from substantial rise in interest rates since May and inflation, and there was uncertainty about how they will respond.

Bullock said the RBA decided to hike by 25bps “while it took stock of developments in consumption, wages and the international economy.”

A smaller hike of 25bps is also a reflection of the fact that the RBA meets more frequently than most of its peer central banks. While the incremental change was smaller, the policy trajectory has been steep, or steeper, than other central banks, Bullock said.

Bullock reiterated the guidance provided in the cash rate statement that the board expects to increase interest rates further over coming months, and the pace and timing will be determined by the economic data.

She also emphasised the RBA’s commitment to inflation, saying, “You should be in no doubt, though, that the board is determined to do what is necessary to return inflation to target.”

--Contact: Sophia@centralbankintel.com