The Reserve Bank of Australia has today lifted interest rates by 25 basis points from 2.85 per cent to 3.1 per cent in a bid to ease red-hot inflation, which is at 7.3 per cent.
It’s the eighth rise in as many months and follows the RBA board’s monthly meeting today.
After saying that rates would stay low until 2024, the Reserve Bank's move today is a blow to mortgage holders in the lead-up to Christmas and is designed to curb spending.
RBA Governor Philip Lowe said in a statement: "Inflation in Australia is too high, at 6.9 per cent over the year to October. Global factors explain much of this high inflation, but strong domestic demand relative to the ability of the economy to meet that demand is also playing a role. Returning inflation to target requires a more sustainable balance between demand and supply.
"A further increase in inflation is expected over the months ahead, with inflation forecast to peak at around 8 per cent over the year to the December quarter. Inflation is then expected to decline next year due to the ongoing resolution of global supply-side problems, recent declines in some commodity prices and slower growth in demand.
"Medium-term inflation expectations remain well anchored, and it is important that this remains the case. The Bank’s central forecast is for CPI inflation to decline over the next couple of years to be a little above 3 per cent over 2024.
"The Board expects to increase interest rates further over the period ahead, but it is not on a pre-set course. It is closely monitoring the global economy, household spending and wage and price-setting behaviour.
"The size and timing of future interest rate increases will continue to be determined by the incoming data and the Board’s assessment of the outlook for inflation and the labour market. The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that."
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