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RBA raises interest rates to 4.85 per cent and warns inflation will not hit target until 2027
The Reserve Bank of Australia raised interest rates to 4.85 per cent and warned inflation will not hit target until 2027.
Key points
- Six of the nine monetary policy board members voted to raise the cash rate target by 25 basis points, while three voted to hold.
- The latest hike adds $122 to monthly repayments on an average new mortgage of $731,000.
- Headline inflation is forecast to hit 4.5 per cent by December and still be at 3.7 per cent by the middle of next year.
Why it matters. Borrowers face higher mortgage repayments, and the RBA's inflation warning could mean no rate cuts next year, as the major banks are forecasting.
The Reserve Bank of Australia raised its cash rate target by 25 basis points to 4.85 per cent on Tuesday, its fifth hike this year, in a split vote. It now sees inflation returning to target only by the end of 2027, and left open another hike next month or in 2027. The move adds $122 to monthly repayments on an average new mortgage, and unemployment is forecast to reach 5 per cent by June 2028.
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RBA raises interest rates to 4.85 per cent and warns inflation will not hit target until 2027
The Reserve Bank of Australia raised the cash rate target by 25 basis points to 4.85 per cent. Six of the nine members of the monetary policy board voted for the increase, while three voted to leave rates unchanged. The rise is the highest level since December 2008 and the fifth hike this year. The bank warned that inflation will not return to its target range until the end of 2027. Home borrowers are facing a significant increase in repayments as a result.
Why inflation data may be unnecessarily driving interest rates higher
The ABS may be overstating Australia’s inflation problem – just look at cigarettes, solar energy and electric cars. How can the Reserve Bank of Australia get inflation back into the 2 per cent to 3 per cent target band? Plan A for the RBA and the government seems straightforward: hike interest rates, crush demand and pray for some sort of peace in the Middle East. But there is another question worth asking: Is the Consumer Price Index capturing the inflation that households are experiencing ? Subscribe to gift this article Gift articles to anyone you choose each month when you subscribe. Fetching latest articles.