The RBA today lifted the official cash rate by another 0.25%, taking it to 2.85%.
So, as the nation celebrated the Melbourne Cup today, Australia’s Central Bank showed it’s still cracking the cash-rate whip to rein in a galloping inflation rate.
In doing so, the Central Bank has made it the seventh consecutive cash rate hike since May.
This rise was in line with expectations of most market analysts. Especially as annual inflation figures released last week saw a jump from 6.1% to 7.3% — a 32-year high for inflation in Australia.
The RBA warned today that inflation is likely to peak at 8% this year, before easing in the new year.
‘As is the case in most countries, inflation in Australia is too high,’ noted the RBA today.
‘Over the year to September, the CPI inflation rate was 7.3%, the highest it has been in more than three decades. Returning inflation to target requires a more sustainable balance between demand and supply.’
The RBA said a further increase in inflation is ‘expected over the months ahead’, with inflation now forecast to peak at around 8% later this year.
‘Inflation is then expected to decline next year … The Bank’s central forecast is for CPI inflation to be around 4.75% over 2023 and a little above 3% over 2024.’
Time will tell on all these projections.
Last month’s relatively modest rate rise of 0.25% was a signal to some analysts that the RBA may have been looking to pause its policy.
This was put to bed after last week’s release of the quarterly Consumer Price Index (CPI), which rose 1.8%, pushing up the annual figure.
Today’s news comes just a week after the first Albanese Government’s budget, delivered by Federal Treasurer Jim Chalmers, which focussed on easing cost of living pressures.
But with inflation still running hot, the cash rate will inevitably rise over the coming months before any lowering might happen. This means these cost of living pressures aren’t about to end any time soon, particularly as most lenders are passing on the rate increases.
Australia’s Central Bank added today that the seven successive rate rises have been a necessity.
‘The Board has increased interest rates materially since May. This has been necessary to establish a more sustainable balance of demand and supply in the Australian economy to help return inflation to target.
‘The Board expects to increase interest rates further over the period ahead,’ it added.
Will the RBA play the role of Christmas scrooge and lift it once again? Or will there be a morsel of festive relief for Australia’s home loan borrowers?
Let’s see what happens on December 6 when the board meets for the final time in 2022. The smart money would be on another rise. Better odds than any horse.
If these rate hikes have you concerned, contact Mortgage Broker Group.
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