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RBA signals housing and inflation concerns may drive future rate hikes

The RBA said it sees no systemic risk amid the “Bathla situation” and characterized July CPI as only one month of data, while emphasizing low tolerance for inflation.

Reported · Written up by our desk · Central Banks

FXStreet reports Reserve Bank of Australia Assistant Governor Hunter said the housing market acts as a key transmission channel for monetary policy, and that the RBA is looking to cool conditions in both housing and the broader economy.

Hunter said the impact of house price changes on consumer spending is small, and that the RBA does not expect a recession in the economy. He added the central bank wants to see a weaker economy relative to trend, while monitoring for risks.

The RBA also reiterated inflation is its top priority and warned it may need to hike rates if inflation appears set to intensify. Hunter said the July CPI release was only one month of data, and the board has low tolerance for inflation.

FXStreet notes the RBA sets interest rates to influence monetary conditions and currency stability, with relatively higher rates generally strengthening the Australian dollar, and the central bank can also use quantitative easing or tightening alongside its main rate tool.

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