RBA Rates on Hold

Reserve bank governor Glen Stevens has flagged that interest rates are likely to be on hold until at least the middle of the year, saying the central bank is “ahead of the game”, in its fight against inflation.

However, the rate rise cycle appears far from over as Mr Stevens warned that people would need to watch spending as a flood of income flowed through the economy.

The big fear for the Reserve Bank is rising rates due to demand for labour, resulting in inflationery pressures.

If inflation looks like trending up towards the end of the year, the bank will certainly increase interest rates to slow the level of consumer spending, and excessive wages rises.

Mr Stevens also said the reason they put interest rates up back in November was because of the high prices Australia is getting for its exports like iron ore and coal and it needed to take the heat out of the economy and they thought it was the right decision.

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