December 7, 2022

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Live news updates: Zelensky says Johnson remaining as UK PM is 'good news'

Live news updates: Zelensky says Johnson remaining as UK PM is ‘good news’

The Reserve Bank of Australia raised interest rates by 50 basis points, moving to curb rampant inflation with an increase that exceeded expectations.

The decision to raise the interest rate to 85 basis points illustrates a more aggressive stance by the central bank to deal with inflation after a moderate rise last month. This is the first time the RBA has introduced consecutive rate increases since 2010 and the largest rate increase since February 2000.

Reserve Bank of Australia Governor Philip Lowe said the measure is necessary to bring inflation back to target levels over time.

“Inflation is expected to rise further, but then fall back towards the 2-3 percent range next year,” he said. “Rising electricity and gas prices and recent increases in gasoline prices mean that, in the near term, inflation is likely to be higher than expected a month ago.”

Inflation in Australia has been lower than in many other markets, but the cost of gasoline and fresh food is starting to hit consumer confidence. Fast food chain Kentucky Fried Chicken said this week that it will start using cabbage leaves in Australia due to supply chain problems that have increased the cost of lettuce.

Supply problems have been driven in part by recent floods in the country that have damaged the agricultural sector. Lowe said global factors, including the pandemic and the war in Ukraine, have also contributed to rising inflation, as well as a tight labor market.

Jim Chalmers, the new Australian Treasurer after Labor came to power last month, has warned of a “terrible” economic situation if inflation is not brought under control.

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Chalmers wrote on Twitter: “Difficult news for homeowners who are already facing a massive rise in the cost of living, including rising energy prices. A better future awaits but first we must confront this challenge of inflation that we have inherited, and the rising interest rates that accompany it.”