The Reserve Bank says a rise in the official cash rate this year is “plausible” and it may have to act decisively if supply shocks from Russia’s invasion of Ukraine and other shortages start to lift inflationary expectations in Australia.
In a speech to an Australian Financial Review summit on Wednesday morning, the RBA governor, Philip Lowe, said Australia’s economy was relatively well-placed to ride out the war-related supply disruptions because the country exports “many of the commodities whose prices are rising”.
Despite financial markets and some economists predicting the RBA will raise its cash interest rates from a record low 0.1% as soon as July, if not earlier, Lowe reiterated that the bank was in no hurry to move.
“The recent lift in inflation has brought us closer to the point where inflation is sustainably in the target range [of 2% to 3%],” he said. “So too have recent global developments. But we are not yet at that point.”
