RBA Increases the official Interest Rate by .5% to 1.85%
The Reserve Bank of Australia (RBA) has increased the official interest rate by .5% to 1.85%. The fourth consecutive increase making the this its most agressive tightening in more than 30 years.
This latest tightening of monetary policy is expected to dramatically slow the economy and increase unemployment as the RBA concedes that higher inflation and increased borrowing costs are decreasing household budgets and home values.
Analysts expect the big four to pass on the full 0.5 percentage point rise to home loan customers.
Governor Philip Lowe revealed the bank expects economic growth to be 3.25 per cent this year, before falling to 1.75 per cent in the next two years.
The RBA expects inflation to reach 7.75 per cent by years’ end, up from its May prediction of 5.8 per cent. Inflation is expected to stay above 4 per cent through next year before falling to about 3 per cent in 2024.
Financial markets, which accurately predicted the RBA’s lift interest rates, now believe the cash rate will peak at 3.2 per cent by March next year. Within six months, markets expect the RBA to have delivered at least one rate cut in a bid to support the economy.