The Reserve Bank has signalled its recent aggressive approach to interest rates may be nearing an end, saying official interest rates are not too far away from what policy-makers consider to be “normal” levels.
RBA assistant governor Guy Debelle has told a Senate inquiry into finance for small business, the economy has been recovering well and the Reserve Bank is trying to ensure the current pace of growth can be sustained.
Last week, the Reserve Bank raised the official cash rate to 4.25 per cent, marking its fifth rate rise since last October.
Dr Debelle says at that current setting, the cash rate is closer to average levels.
“We are deciding that the situation where we needed historically low interest rates is no longer necessary, so we’re moving back to something around about average levels, which is not far away from where we are at the moment,” he said.
When asked by the South Australian Senator Annette Hurley whether the Reserve Bank was trying to rein in demand by raising interest rates, Dr Debelle said that was not the case.
“We’re not trying to depress demand, we’re trying to make it grow at a sustainable pace,” he said.
The central bank has previously said that normal or average rates would be somewhere in the vicinity of 4.25 to 4.75 per cent.