RBA lifts its rate to 4.35% as inflation spikes
The RBA increased its official cash rate today as headline inflation surged on the back of a sharp increase in oil prices.
Australia’s Reserve Bank confirmed that its cash rate has gone up by 0.25% – from 4.10% to 4.35% – in response to economic conditions it predicts will have inflation above target ‘for some time’.
‘The conflict in the Middle East has resulted in sharply higher fuel and related commodity prices, which are already adding to inflation.
‘There are early signs that many firms experiencing cost pressures are looking to increase prices of their goods and services.
‘Short-term measures of inflation expectations have also risen,’ explained the RBA today, after a majority of eight to one on the board voted in favour of a hike.
Dubbed by one economist as a ‘Hormuz hike’, the RBA cash rate has returned to a level last seen in November 2024.
Last year seems a distant memory after three RBA rate cuts across 2025.
That relief has been chalked off in three board meetings so far this year, as home loan mortgage holders look set for another hit to repayments.
In fact, last month, RBA Deputy Governor Andrew Hauser pre-empted today’s news with this rather pessimistic statement.
‘We have a big income shock coming our way… it is a central banker’s nightmare: inflation up, activity down,’ he noted in a New York University speech.
Headline inflation has rocketed up to 4.60% – that’s the big news.
However, the underlying inflation rate held steady at 3.30% – though both are over the RBA’s preferred 2–3% band.
It’s incredible to think that the official rate was 3.60% in January this year. Of course, that was before the conflict in the Middle East and its effects on oil prices.
So, a homeowner with a $600,000 mortgage would pay about $91 more per month now (if the hike is passed on).
Across the three rate rises this year – in February, March and today – that’s an extra $272 a month, or roughly $3,264 a year.
Looking at the lenders, five raised 30 variable rates by an average of 0.23 percentage points in the past month, while 13 lenders increased 261 fixed rates by an average of 0.26 points, according to Canstar.
‘The Board assessed that … the risks remain tilted to the upside, including to inflation expectations,’ added the RBA.
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We can assist with tips on how to uncover lower rates, boost your savings, consolidate other debts, and take the pressure off increases in household prices.
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