Australia’s central bank has bumped up interest rates for the 10th time in a row, bringing the cash rate to its highest point in more than a decade.
The Reserve Bank on Tuesday lifted the official cash rate by another 25 basis points, taking it to 3.6 per cent.
The increase will pile more pressure on mortgage holders, who are already feeling the heat from increasing costs.
The hike will add more than $1000 to the average monthly mortgage compared with repayments in April 2022, Finder analysis shows.
The Reserve Bank has been hiking interest rates aggressively to tackle inflation, which came in at a hotter-than-expected 7.8 per cent in the December quarter – its highest level since 1990.
In a statement accompanying the rates decision, RBA governor Philip Lowe signalled further moves to stymie inflation but adjusted his phrasing slightly.
“The board expects that further tightening of monetary policy will be needed to ensure that inflation returns to target and that this period of high inflation is only temporary,” he said.
City Index senior market analyst Matt Simpson said this represented a slight shift from the language used last month – when Dr Lowe said further interest rate increases would be needed in the coming months – and could signal the end of the tightening cycle was getting closer.
“Of course, a final 25 (basis point) hike is far from certain at this point, but the main takeaway for me is that the RBA have removed a key hawkish sentence from the February statement,” he said.
The RBA governor also pointed to Australia’s slowing economy, strong but easing labour market and recent data that showed the risk of prices and wages chasing one another was decreasing.
Dr Lowe also said inflation had likely peaked as indicated by the monthly consumer price index, which grew 7.4 per cent in the 12 months to January.
Treasurer Jim Chalmers agreed that inflation had likely passed its highest point.
“But it will be higher than we’d like for longer than we’d like,” he told parliament on Tuesday.
Dr Chalmers said the government would take responsibility for the areas of inflation it could control.
“Australians understand that a lot of this inflation is coming at us from around the world and they understand that broken supply chains here in Australia have been part of the problem as well,” he said.
“And our three-point strategy is all about, as we’ve said before, cost-of-living relief, repair of supply chains and restraint in the budget.”
© AAP 2023
