RBA interest rates: Reserve Bank increases official cash rate to 3.85% in shock decision
Australians’ respite from rising borrowing costs will be a short one, with the Reserve Bank surprising most economists by lifting its key interest rate again and warning more hikes might be needed.
The RBA board raised its cash rate 25 basis points to 3.85% at its monthly meeting on Tuesday, defying investors who had bet the central bank would extend its pause for a second month. The dollar soared and shares sank on the surprise.
The move comes on top of 10 consecutive rises since last May and brings the cumulative increase to 3.75 percentage points.
“Inflation in Australia has passed its peak, but at 7% is still too high and it will be some time yet before it is back in the target range,” the RBA governor, Philip Lowe, said in a statement. “Given the importance of returning inflation to target within a reasonable timeframe, the board judged that a further increase in interest rates was warranted today.”
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The treasurer, Jim Chalmers, said the RBA move was “a really difficult decision for a lot of Australians who are already under the pump”.
“This is a reminder that inflation remains the primary challenge in our economy,” Chalmers said, adding his upcoming budget would prioritise “responsible cost of living relief” that doesn’t add to inflation when it is released next Tuesday.
The rates decision came despite last week’s release of weaker-than-expected inflation, particularly for the underlying price pressures the RBA follows closely.
Instead, the board weighed other factors, such as a jobless rate at near half-century lows, the nation’s population expected to swell by 700,000 this year and next and a rebound in property
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