RBA hands down shock interest rate hike in fresh assault on inflation

The central bank today decided to lift the official cash rate target by 25 basis points from 3.6 per cent to 3.85 per cent.

It is the 11th interest rate hike since April 2022, when interest rates were at the record-low level of 0.1 per cent.

In his monetary statement, RBA Governor Philip Lowe said the cost of living in Australia was “still too high”.

“Inflation in Australia has passed its peak, but at 7 per cent is still too high and it will be some time yet before it is back in the target range,” he said.

“Given the importance of returning inflation to target within a reasonable timeframe, the Board judged that a further increase in interest rates was warranted today.”

Lowe said that it would take “a couple of years” for inflation to hit the RBA’s target range of 2 to 3 per cent.

Currently, the annual rate of inflation in Australia is 7 per cent.

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“The Board held interest rates steady last month to provide additional time to assess the state of the economy and the outlook,” he said.

“While the recent data showed a welcome decline in inflation, the central forecast remains that it takes a couple of years before inflation returns to the top of the target range; inflation is expected to be 4½ per cent in 2023 and 3 per cent in mid-2025.”

Graham Cooke, head of consumer research at Finder, said the news is a heavy blow for many.

“Australians with an average loan size of $586k will be forking out around $14,000 more per year compared to what they were paying this time last year.

“The market consensus is that we are now at the peak of a frenzied, steep climb.

“The question yet to be answered is how well Aussie homeowners will be able to breathe in the thin air.”