RBA Announces Historic Fifth Rate Hike
The Reserve Bank of Australia has revealed a fifth successive monthly increase to interest rates, again by 50bps.
The announcement by the RBA at its September meeting today was widely anticipated, with the four major banks all expecting the move.
It brings the official cash rate in Australia to a seven-year high of 2.35%.
This continues the RBA’s record-setting trend, as it’s the first five-month streak of rate hikes since they introduced a 2% to 3% inflation target in 1990.
Currently Australia’s core inflation rate sits at 6.1%, a fair way off the target of 2.5% and the highest since that target was first set.
If this all feels a bit sudden, that’s because it is, especially considering that RBA Governor Phillip Lowe initially claimed back in 2020 that interest rates were unlikely to rise until 2024.
But in its statement today, the Reserve Bank said it was committed to doing what was necessary to return inflation back to the target band.
However it did admit that it was flying blind, saying there was no pre-set path and that future increases would be guided by the data and outlook for the labour market.
The board maintains its stance that inflation will peak later this year before trending downwards, with the big uncertainty continuing to be household spending.
What does this all mean for homeowners? Well it’s no surprise that repayments will go up, with the payments on a $800k mortgage to increase to over $4300 per month. That’s up $1000 since April this year.