Live interest rate decision: RBA set to announce cash rate hike

Here is the latest analysis from business journalist Gareth Hutchens:

The Reserve Bank will consider raising interest rates again today.

Some economists believe we will see a sharp rise in rates, with more rate hikes to follow in the months ahead.

But will a rapid rise in rates lead to slower growth and higher unemployment? And if they do, what will it mean for the unemployed?

Well, we are already using unemployment to curb inflation. That might give a clue.

This inflation is a global problem and experts everywhere are trying to solve it.

But a few weeks ago, US economist Larry Summers said that if US policymakers wanted to get their inflation under control, they would have to let unemployment rise significantly in coming years.

He said there were few options available to them.

“We need five years of unemployment above 5% to contain inflation – in other words, we need two years of unemployment at 7.5% or five years of unemployment at 6% or one year of 10% unemployment,” he said.

It is not uncommon to hear an economist speak so candidly, and Mr. Summers is as common as can be.

But it was hard.

At different times in history, economists like him have often suggested that the best “cure” to kill inflation is higher unemployment.

Logically, when you take money away from people, they won’t have any more money to spend, so prices will eventually go down and the economy will rebalance.


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