Australia central bank hikes rates to 12-year high of 4.35%
The central bank had received fresh data since its August meeting and “the weight of this information suggests that the risk of inflation remaining higher for longer has increased,” Bullock said
Reuters
Representative Image (Photo/AP)
SYDNEY: Australia’s borrowers have been dealt another blow with the Reserve Bank lifting its key interest rate for the first time in five months to ensure inflation keeps falling.
The RBA board on Tuesday decided to hike its cash rate 25 basis points to 4.35%, a 12-year high. The increase, widely anticipated by economists, was the central bank’s 13th rate rise since May 2022.
New governor Michelle Bullock and the board had lately sent repeated signals they were poised to resume rate rises if inflation didn’t slow as expected. The RBA remains ready to hoist interest rates again if required, she said in an accompanying statement.
The central bank had received fresh data since its August meeting and “the weight of this information suggests that the risk of inflation remaining higher for longer has increased,” Bullock said.
“While the economy is experiencing a period of below-trend growth, it has been stronger than expected over the first half of the year,” she said. “Conditions in the labour market have eased but they remain tight. Housing prices are continuing to rise across the country.”
The quarter-point increase will add roughly $100 to monthly repayments for a standard loan of about $600,000. Since the rate-increase cycle began, such mortgagors will be paying about $1450 more each month to lenders once the latest hike is passed on, according to RateCity data.
Markets have shifted to expect today’s rate increase after inflation numbers for the September quarter came in higher than the RBA’s own predictions. The annual pace of price increases had also accelerated from 4.9% in July to 5.6% in September.
Inflation has been above the RBA’s 2%-3% inflation target range for a record 10 quarters, according to UBS. On projections made August, that goal won’t be reached until seven more quarters, and possibly later if forecasts by the International Monetary Fund – based on talks with Australian authorities – are correct.
“Whether further tightening of monetary policy is required to ensure that inflation returns to target in a reasonable timeframe will depend upon the data and the evolving assessment of risks,” Bullock said in the statement.
