Why is the rba increasing interest rates

Reserve Bank Australia's boss Philip Lowe isn't just trying to rein in Aussies' spending by jacking up interest rates – he's also trying to ...

“You had to guess based on the overnight,” said Dr Oliver. “In the late 1980s they hiked rates but they didn’t tell us,” Dr Oliver said. “You threaten to do something more aggressive if you don’t behave. “But to use Dr Lowe’s own words, the RBA has taken a hit to its credibility over its infamous prediction that rates would remain on hold until 2024,” he said. “It’s now trying to ‘ease’ their concerns. Mr Eslake said in the past the RBA “would have had a higher degree of credibility and its jawboning would have been effective”. It’s also psychological manipulation – all central banks do it.” “It was raised from about 10.5 per cent to over 18 per cent but the RBA didn’t come out and announce it.” He said it could be argued that in February the RBA’s unexpectedly hawkish tone “might partly be jawboning” to “convince people to slow down their spending”. “They try to sound really tough, such that people generally expect interest rates to go up a lot – that causes their behaviour to change to achieve the outcome the central bank wants without necessarily having to do it,” Dr Oliver said. Central banks like the RBA “mainly use it by threatening to be more aggressive on interest rates than they really want to be”. “It refers to the concept of trying to achieve an economic outcome, but you don’t necessarily want to have to change interest rates as dramatically as might be required, so you appeal to people’s psychology, if you like,” he said.