The Australian Central Bank (RBA) kept interest rates unchanged at a low of 0.10% at its March 2022 meeting as widely expected by the market.
Governor Philip Lowe reiterated his earlier statement that policymakers would continue to be patient and also mentioned that the war in Ukraine was a major source of new uncertainty for the RBA to set its monetary policy.
Policymakers also reiterated the uncertainty about rising inflation following recent developments in global energy markets and ongoing supply problems.
Base inflation is expected to increase further in the next quarter to around 3.15% before declining to around 2.75% in 2023.
Meanwhile, the unemployment rate is projected to drop below 4% this year and will remain at that level in 2023.
The Governor added, it is reasonable that the first interest rate hike could happen by the end of this year if the economy continues to recover, which the market expects to happen as early as July.
Russia’s attack on Ukraine has added new geopolitical uncertainty to the RBA, which had previously faced pressure from massive flooding in New South Wales (NSW) and Queensland.
While not having a direct impact, the protracted conflict and sanctions imposed on Russia could cause the global economy to suffer, thus disrupting Australia’s recovery from Covid-19.
