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RBA Hikes Rates Past 1%

For the third straight month the Reserve Bank has hiked interest rates, this time by 50 basis points.

The official cash rate now stands at 1.35%, levels not seen since 2019.

The RBA said that inflation in Australia is high, but not as high as it is in many other countries.

Inflation is likely to peak later this year according to the Reserve Bank, before declining back towards 2-3% next year.

One source of ongoing uncertainty is the behaviour of household spending as budgets continue to be impacted by higher prices.

The Board is also monitoring the global situation in Ukraine and the COVID situation out of China which could continue to impact markets.

So what does today’s rate hike mean for consumers?

For the average homeowner this means repayments will rise. For example, those with a 25-year, $500,000 loan will be hit by an increase of $137 a month.

Now while banks have been quick to increase interest rates for mortgage repayments, they have been a bit slower when it comes to savings account interest rates.

It’s unlikely that this will be the last rate hike for the year, however experts are predicting a slowdown of rate increases as the RBA seeks to adapt to cost of living pressures.

How high can it go? Well Westpac’s latest forecast says the cash rate could increase to 2.35% by the end of 2022, and hit 2.60% by early 2023.

So brace yourselves for impact.

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