The Reserve Bank of Australia raised the cash rate by 50 basis points to 1.85% at its August RBA board meeting, pumping the brakes on inflation for the fourth straight time.
The increase was widely expected by markets and analysts.
In the year From a record low of 0.1% in 2020 in response to the Covid pandemic, the RBA has now increased the cash rate by 0.25%, 0.5%, 0.5% and 0.5% each month since May. These are the first increases in 11 years.
At 1.85%, the rate is now at its highest level since May 2016.
Homeowners with $330,000 in debt will have to pay an extra $220 to $90 a month starting in May.
For a $500,000 mortgage, the additional payment would be about $140 per month, up from $335 and additional payments from previous increases.
In the year Inflation is currently the highest since the early 1990s at 6.1 percent in the June quarter; And at 4.9%, RBA Governor Philip Lowe said inflation had returned to normal. 2–3% region remains a high priority.
“The path to achieving this balance is narrow and shrouded in uncertainty, not least because of global growth,” he said.
The outlook for global economic growth has been dampened by high real incomes from high inflation, the tightening of monetary policy in most countries, Russia’s invasion of Ukraine, and China’s covid containment measures.
Inflation is expected to be higher later this year, with the RBA central forecast for 7.75% from 2022, slightly above 4% from 2023 and around 3% from 2024.
The central bank’s forecast is for GDP growth of 3.25% beyond 2022 and 1.75% growth in each of the next two years.
“The Australian economy is expected to continue to grow strongly this year,” Lowe said in a statement.
“Employment is growing strongly, consumer spending has been resilient and business investment is improving. National income is growing on the back of strong trade growth. The labor market is tighter than it has been in years.”
But the nature of household spending was “a key source of uncertainty”, Lowe said, adding that “the current round of increases was needed to bring inflation back to target and create a more sustainable balance of demand and supply in the Australian economy”. , suggesting an additional amount will increase in the future.
