RBA hike interest rates by 0.25 per cent, points to high inflation
The RBA has hiked rates for the sixth month in a row, with the Tuesday meeting seeing rates rise by 0.25 per cent.
Three of the big four banks expected a half a percentage point rise, with just Commonwealth Bank predicting the 25 basis point rise.
The official cash rate is now at 2.6 per cent.
The RBA noted in their statement that, as is the case in most countries, inflation in Australia is too high.
"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," RBA Governor Philip Lowe noted in the announcement.
The RBA predicted a further increase in inflation over the months ahead, before it then declines back toward the two to three per cent range.
"The expected moderation in inflation next year reflects the ongoing resolution of global supply-side problems, recent declines in some commodity prices and the impact of rising interest rates.
"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 be around 7¾ per cent over 2022, a little above 4 per cent over 2023 and around 3 per cent over 2024."
As for mortgages, Lowe noted that higher inflation and higher interest rates are putting pressure on household budgets, with the full effects of higher interest rates yet to be felt in mortgage payments.
"Consumer confidence has also fallen and housing prices are declining after the earlier large increases.," Lowe suggested.
"Working in the other direction, people are finding jobs, gaining more hours of work and receiving higher wages. Many households have also built up large financial buffers and the saving rate still remains higher than it was before the pandemic."
Graham Cooke, head of consumer research at Finder, said Aussies with a $500,000 mortgage will be paying almost $9,000 more a year in interest compared to just six months ago.
“Australians with a $500,000 mortgage will be forking out $735 more per month compared to what they were paying in April.
“That’s a whopping amount of extra money to pay every month – especially when everyday items like groceries and petrol are skyrocketing in price."