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Australia’s central bank edges closer to raising interest rates

SYDNEY (XINHUA) – The Reserve Bank of Australia (RBA) has given its strongest indication yet that an interest rate rise could be imminent.

In the RBA’s meeting minutes for April released yesterday, the board members noted an anticipated increase in inflation “brought forward the likely timing of the first increase in interest rates”.

“For some time, the board had been communicating that it wanted to see evidence that inflation is sustainably within the two to three per cent target range before increasing interest rates,” the minutes read.

“Over the coming months, important additional evidence will be available on both inflation and the evolution of labour costs,” the RBA said, adding that the board “agreed it would be appropriate to assess this evidence and other incoming information” regarding rate changes.

Some of Australia’s leading banks, noting the nation’s current economic strength, have already predicted a rate rise could occur well before the RBA’s initial intentions.

A man walks past the Reserve Bank of Australia in Sydney. PHOTO: AP

Commonwealth Bank of Australia Chief Economist Stephen Halmarick, in a statement earlier this month, said the “stronger economic picture” was “consistent with our expectations of an RBA rate hike cycle to begin in June, though we expect this cycle to be relatively shallow”.

Overall, the RBA confirmed Australia’s economy was “resilient” despite global and domestic supply shocks brought about by the war in Ukraine, the Omicron outbreak and widespread and repeated flooding along the nation’s east coast.

“The strength of the Australian economy was evident in the labour market,” the minutes read.

“Unemployment and underemployment rates were at their lowest levels in many years and forward-looking indicators of labour demand remained strong.”

Noting the four-per-cent unemployment rate, the RBA expected further strengthening of aggregate wages growth and broader measures of labour costs.

In other international economic observations, the RBA reported that the Ukraine crisis was likely to trigger “volatile” and unpredictable worldwide commodity prices “at a time of strong demand as the global economy recovered from the COVID-19 pandemic”.