The Reserve Bank has inflicted more pain on the nation’s army of mortgage holders, lifting interest rates to an 11-year high of 4.1 per cent.
Announcing the 0.25 percentage point rise in the official cash rate on Tuesday, bank governor Philip Lowe warned more increases could be necessary, saying while inflation had passed its peak, it was still too high.It is the 12th increase in rates in 13 board meetings, with the bank tightening monetary policy at the fastest rate since the late 1980s. That period ended in the 1990-91 recession.
Lowe said the economy had started to slow and the labour market was easing, but it remained “very tight”.There had been a pick-up in wage growth, with Lowe noting that public sector wages were likely to lift further while theBut he also said that at the aggregate level, wages were still consistent with the RBA’s 2-3 per cent inflation target as long as productivity growth lifted.“A significant source of uncertainty continues to be the outlook for household consumption,” he said.
Ahead of the decision, Treasurer Jim Chalmers rejected claims by the Coalition that last month’s budget was adding to the inflation pressures the Reserve Bank was trying to quell with higher interest rates. “There is enormous pressure on cost of living out there and that means there’s pressure on interest rates and, sadly, we are in a position where the expectations of markets and economists say we’re going to see more pain,” he said.
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