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Date Published : Tuesday, May 06, 2008
The Reserve Bank of Australia (RBA) has announced it will hold interest rates at 7.25 per cent for a third consecutive month amid growing uncertainty in the nation's financial markets.
High inflation – with the Consumer Price Index at over four per cent – has been noted as the reason for the decision to keep interest rates at 7.25 per cent – their highest level for over 12 and a half years.
Four interest rate rises in six months, the global credit crunch, rising personal debt levels and increasing food and fuel prices were all taken in to consideration when the RBA board met in Sydney, Glenn Stevens, RBA governor, stated.
However, the Australian reports that rates could be pushed up further in the coming months if workers across the country demand pay increases in order to match rising living prices.
A number of major employers are currently under pressure from workers about under inflation pay rises and, according to the publication, if such demands are met, it could signal higher interest rates in the future.
Mr Stevens said in a statement: "In the short term, inflation is likely to remain relatively high, but it should decline over time provided demand evolves as expected. Should demand not slow as expected or should expectations of high ongoing inflation begin to affect wage and price setting, that outlook would need to be reviewed.
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