RBA Melbourne Cup Day interest rates decision: Reserve Bank of Australia makes big call in face of high inflation

The Reserve Bank of Australia has resumed hiking interest rates after holding steady for the past four months, piling on financial pressure for mortgage holders.

The RBA met on Tuesday and chose to hike the cash rate by 25 basis points to 4.35 per cent.

WATCH THE VIDEO ABOVE: Economists share RBA cash rate predictions ahead of Tuesday’s decision.

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The hike means the average borrower with a $500,000 loan and 25 years remaining will see their monthly repayments increase by about $76.

Economists at each of the big four banks had predicted the increase in the face of stubbornly high inflation.

RBA Governor Michele Bullock last month indicated that the board’s tolerance for a slow return to its inflationary target of between 2 and 3 per cent was low.

Chief economist at CreditorWatch Anneke Thompson said the decision to raise interest rates would be “controversial” but necessary as “some pockets of the economy are still seeing rampant price rises”.

“Unfortunately, the grim reality is the goods or services that are still recording high levels of inflation are not under any demand pressure. Therefore, this cash rate rise will have little impact on the prices of rents, fuel, insurance and utilities,” she said.

“Instead, this rise will be most burdensome for those businesses already at the coal face of the fight against inflation, such as the food and beverage, retail trade and construction sectors.”

More to come…

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