The Reserve Bank has increased interest rates for the first time in more than 11 years, with a 25-basis-point hike taking the cash rate target to 0.35 per cent.
- The Reserve Bank’s 25-basis-point increase to the cash rate target takes it to 0.35 per cent
- The RBA governor warns that getting inflation under control “will require a further lift in interest rates”
- Financial markets and economists expect the next official rate rise to occur in June
If passed on in full by banks, the rate rise will add $65 a month to repayments on a $500,000 mortgage, and double that on a million-dollar loan.
The move came as little surprise to financial traders, who had priced in around a two-thirds probability of the RBA raising rates this month.
Reserve Bank governor Philip Lowe said the combination of recent very high inflation numbers and evidence that workers were starting to get bigger wage increases meant the time was right for “normalising” interest rates away from emergency lows.
“The board is committed to doing what is necessary to ensure that inflation in Australia returns to target over time,” he noted in his post-meeting statement.
“This will require a further lift in interest rates over the period ahead.”
Reserve Bank governor Philip Lowe said the cash rate should eventually rise to at least 2.5 per cent.(ABC News: John Gunn)
Mr Lowe told reporters that the cash rate still had a long way to go to get back to more normal levels where it at least matched the rate of inflation.
“Over time it is not unreasonable to expect interest rates would get to 2.5 per cent.
“How quickly we get there, and if we do get there, will be determined by how events unfold.”
Markets are pricing in the certainty of another rise in June, with bets split between another 25…….