Having increased the cash rate for seven consecutive months, the RBA has announced a second consecutive 25 basis point increase to the cash rate — which is now 2.85 per cent.
Governor of the RBA Phillip Lowe said in an online statement that inflation in Australia is currently too high.
“A further increase in inflation is expected over the months ahead, with inflation now forecast to peak at around 8 per cent later this year,” he said.
“Inflation is then expected to decline next year due to the ongoing resolution of global supply-side problems, recent declines in some commodity prices and slower growth in demand.”
The cash rate represents the interest rate on unsecured overnight loans between banks and serves as the benchmark rate for mortgages, savings accounts and exchange rates. Inflation is the increase in the cost of goods and services bought by households.
Mr Lowe said the RBA’s priority is returning inflation to the 2 to 3 per cent range over time.
“One source of uncertainty is the outlook for the global economy, which has deteriorated over recent months. Another is how household spending in Australia responds to the tighter financial conditions,” he said.
“The Board expects to increase interest rates further over the period ahead. It is closely monitoring the global economy, household spending and wage and price-setting behaviour.”
Head of consumer research at Finder Graham Cooke said someone with a $500,000 mortgage will be paying $815 more a month compared to when the rate started rising seven months ago.
“This seventh consecutive rate hike – 275 basis points in total – will be a bitter pill to swallow for many,” he said.
“The current series of rate hikes has added almost $10,000 to the annual cost of a $500,000 mortgage.”
