Suprise, Suprise - RBA lifts rates by 0.25 percentage points
The board of the Reserve Bank of Australia (RBA) has lifted the official cash rate from 3.6 per cent to 3.85 per cent in a surprise move just a week out from the federal budget, amid signs households are continuing to feel cost-of-living pressures. The increase in the cash rate – now at its highest level in 11 years.
RBA governor Philip Lowe said inflation, at 7 per cent, was still too high and would take some time to come back down to the bank’s target range of 2-3 per cent. “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.”
While inflation has declined from its December peak of 7.8 per cent, Lowe said inflation for services was still very high and potentially still rising. The jobs market also remains tight, with figures from last week showing the unemployment rate remained at the near 50-year low of 3.5 per cent, and many businesses were still struggling to hire workers.
Lowe also signalled the RBA expects the economy to slow more than expected. He said GDP is now forecast to expand by 1.25 per cent this year. In its February forecasts, the bank expected economic growth of 1.6 per cent through 2023.
Unemployment is expected to be around 4.5 per cent by the middle of 2025. It is currently 3.5 per cent. The Reserve Bank will on Friday release its latest quarterly economic forecasts.