The Australian Central Bank maintains its benchmark cash rate at 4.1% but issues a warning that there may be more increases

At a policy meeting on Tuesday, Australia’s central bank maintained its benchmark interest rate at 4.1% despite the fact that inflation dropped to 5.6% in May from 6.5% a month earlier.

Since May of last year, the Reserve Bank has increased the cash rate 12 times to bring inflation down to its desired range of 2% to 3%.

Higher interest rates make borrowing more expensive for both firms and individuals, which slows economic growth and helps to ease pricing pressures that have erupted after the COVID-19 pandemic’s slowdowns.

 

Bank governor Philip Lowe said that more increases could be necessary.

 

In a statement, Lowe noted that more tightening of monetary policy “may be required” to guarantee that inflation returns to goal in a fair amount of time. However, this would depend on how the economy and inflation develop.

 

“The board will have more time to evaluate the state of the economy, the economic outlook, and associated risks due to the decision to hold interest rates steady this month,” Lowe said.

 

According to a research from Oxford Economics, the cash rate would ultimately reach a top of 4.6%.

 

It said that while inflation had peaked, it was still uncomfortably high.

 

The United States Federal Reserve and other central banks were able to reduce or stop rate rises since global inflation pressures had partly subsided.