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Senior RBA official says this year's three rate hikes are working as intended
Macro
Reserve Bank of Australia Assistant Governor Christopher Kent said on the 13th during a speech at an event in Sydney that the three interest rate increases implemented this year are having their intended effect, with monetary tightening restraining household consumption and leading to a slowdown in overall economic activity. Kent explained that it will still take some time before monetary tightening has its full impact on economic activity and inflation, and noted that growth in housing loans, which are closely linked to housing prices, has begun to slow, with the decline in new housing loans particularly pronounced. On the policy rate, he said the current cash rate is near the upper end of the central estimate range for the neutral rate based on various models estimated by the bank, while adding that there remains significant uncertainty around estimates of the neutral rate. The Reserve Bank of Australia decided at this week's board meeting to keep the policy rate at 4.35 percent, but since February this year it has raised rates by a total of 75 basis points to curb persistent inflationary pressure, and Governor Bullock has stressed that the bank is prepared to raise rates further if judged necessary. Core inflation in the June quarter was 3.6 percent from a year earlier, above the medium-term target range of 2 to 3 percent. Markets are pricing in about a 75 percent probability that the policy rate will be raised to 4.60 percent by December.