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RBA Announces Historic Fourth Rate Hike

The Reserve Bank of Australia has revealed a fourth successive monthly increase to interest rates, this time by 50bps.

The announcement by the RBA at its August meeting today was widely anticipated, with the four major banks all expecting the move.

It brings the official cash rate in Australia to a six-year high of 1.85%.

It’s the first time the bank has lifted interest rates at four consecutive meetings since the introduction of the RBA’s 2% to 3% inflation target in 1990.

Currently Australia’s core inflation rate sits at 4.9%, a fair way off the target of 2.5% with the board saying it expects inflation to peak later this year before declining.

The Reserve Bank’s central forecast is for CPI inflation to be just under 8% over 2022, before coming down to 4% over 2023.

The board said after its meeting that the rate increase was a further step in the normalisation of monetary conditions, and it expects to make more over the months ahead.

Despite the period of uncertainty, the RBA expects the Australian economy to continue to grow strongly, forecasting GDP growth of over 3% in 2022.

What does the rate hike mean for homeowners? Well those paying off the average home loan of $500,000 will need to cough up an extra $140 a month.

Federal Treasurer Jim Chalmers said ahead of the meeting that he knew the rate hike would be frustrating for many.

This will make life harder for Australians already struggling with the skyrocketing cost of living,” he said.

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