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Rate hike that stops a nation: Australians make a record SEVENTH rate hike just half an hour before the Melbourne Cup – and more to come with an inflation forecast of EIGHT per cent
- Reserve Bank has raised interest rates for the seventh month in a row
- Cash interest now at nine-year high of 2.85 percent after last hike
- Inflation in the year to September rose 7.3 percent – highest since 1990
- This is more than double the Reserve Bank of Australia’s target of 2 to 3 percent
- RBA Updated Forecast So Inflation Hits New 32-Year High of 8 Percent
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Australian borrowers have endured a record seventh consecutive monthly rate hike to face the worst inflation in 32 years – with more consumer price pain expected.
The Reserve Bank of Australia announced the latest 0.25 percentage point increase just half an hour before the Melbourne Cup, with the Big Four banks all correctly betting on a November 1 gain.
Borrowers have seen a rate hike on the first Tuesday of every month since May, and the cash interest rate is now at a nine-year high of 2.85 percent.
Today’s seventh increase is the largest in a row since the Reserve Bank began publishing a target cash rate in 1990, marking a record increase.
The RBA has revised its forecast to see inflation reach a new 32-year high of 8 percent this year, up from a previous forecast of 7.75 percent.
Australian borrowers endured seventh consecutive monthly rate hike to face worst inflation in 32 years
In the period to September, inflation rose by 7.3 percent, the strongest increase since 1990.
The consumer price index is also more than double the RBA’s target of two to three percent, making more rate hikes very likely.
Gasoline prices have risen 18 percent over the past year, although fuel excise taxes were halved to 22.1 cents for six months to the end of September.
Fruit and vegetable prices are up 16.2 percent, while housing costs are up 10.5 percent, with particularly tight rental vacancy rates.
RBA Governor Philip Lowe stressed that tackling inflation was his top priority, after promising last year that interest rates would not be raised until 2024 “at the earliest.”
“As in most countries, inflation in Australia is too high,” he said.
Global factors explain much of this high inflation, but strong domestic demand relative to the economy’s ability to meet that demand also plays a role.
‘In order to bring inflation back to target, a more sustainable balance between supply and demand is needed.’
A quarter of a percentage point rate increase would add $90 to the monthly repayments for an average $600,000 mortgage.
This borrower will soon be paying $3,145 per month, up from $3,055 now.
As recently as early May, a typical loan had monthly repayments of $2,306, but the latest increase means a borrower will pay $839 more per month.
The rate of monetary policy tightening of 2.75 percentage points in six months is equivalent to the level of tightening over four months at the end of 1994.