Reserve Bank of Australia hikes interest rates by 0.5 percentage points


Reserve Bank of Australia hikes interest rates for the fourth time in a row with an extraordinary 0.5% jump: Here’s what you need to know

  • Reserve Bank of Australia has raised the cash rate by half a percentage point
  • This has seen the cash rate climb to a six-year high of 1.85 per cent on Tuesday
  • Governor Philip Lowe has hinted at more rate rises to tame surging inflation 

The Reserve Bank of Australia has raised the cash rate by half a percentage point with governor Philip Lowe hinting at more increases to tame the worst inflation in two decades.

This has taken the cash rate from a three-year high of 1.35 per cent to a six-year high of 1.85 per cent.

This would see someone paying off an average $600,000 mortgage cop a $169 increase in their monthly mortgage repayments.

The RBA has raised rates now in May, June, July and August marking the steepest pace of increases since 1994.

It has raised rates by 50 basis points at three straight meetings, the first time this has occurred since the Reserve Bank published a target cash rate in 1990.

The Reserve Bank of Australia has raised the cash rate by half a percentage point

Dr Lowe noted the RBA would struggle to get inflation back within the central bank’s two to three per cent target.

‘The path to achieve this balance is a narrow one and clouded in uncertainty, not least because of global developments,’ he said.

Inflation in the year to June surged by a two-decade high of 6.1 per cent.

Without the introduction of the GST, this was the steepest headline inflation, also known as the consumer price index, since 1990. 

Treasury is expecting inflation to hit a 32-year high of 7.75 per cent later this year and remain outside the RBA target band until 2024. 

Treasurer Jim Chalmers told Parliament the latest rate rise would be hard on families. 

‘Families will now have to make more hard decisions about how to balance the household budget in the face of other pressures like higher grocery prices and power prices and the costs of other essentials,’ he said.

This is occurring despite Dr Lowe repeatedly promising last year to keep the cash rate on hold at a record-low of 0.1 per cent until 2024 ‘at the earliest’.

The big banks were all expecting a 0.5 percentage point rate rise. 

This has taken the cash rate from a three-year high of 1.35 per cent to a six-year high of 1.85 per cent. This would see someone paying off an average $600,000 mortgage cop a $169 increase in their monthly mortgage repayments

This has taken the cash rate from a three-year high of 1.35 per cent to a six-year high of 1.85 per cent. This would see someone paying off an average $600,000 mortgage cop a $169 increase in their monthly mortgage repayments

What a 0.5 percentage point rate rise means for borrowers in August

$500,000: Up $141 from $2,215 to $2,356

$600,000: Up $169 from $2,658 to $2,827

$700,000: Up $197 from $3,101 to $3,298

$800,000: Up $225 from $3,544 to $3,769

$900,000: Up $253 from $3,987 to $4,240

$1,000,000: Up $281 from $4,430 to $4,711

Increases based on Reserve Bank cash rate rising from 1.35 per cent to 1.85 per cent taking popular Commonwealth Bank variable rate from 3.39 per cent to 3.89 per cent

 

Read more at DailyMail.co.uk