RBA gallops to 2.85pc cash rate, inflation to hit 8pc

The Reserve Bank of Australia has increased the official interest rate by 0.25 percentage points, the seventh straight rise in a galloping tightening cycle aimed at curbing inflation now expected to peak higher.

RBA governor Philip Lowe revealed the bank now expected inflation to peak around 8 per cent, above the 7.75 per cent tipped in last week’s federal budget, and more interest rate rises would be needed to stymie price rises. “The board expects to increase interest rates further over the period ahead ... [and] remains resolute in its determination to return inflation to target and will do what is necessary to achieve that.”Treasurer Jim Chalmers said inflation was the No. 1 challenge for the economy and the No. 1 focus of the Albanese government.

At 2.85 per cent, monthly repayments on a 25-year, $500,000 mortgage will have increased by $760 since May, $1140 for a $750,000 mortgage, and $1520 for a $1 million loan, according to comparison website RateCity.The latest increase takes the cash rate to its highest level since April 2013, and economists are split on whether the RBA may be on the home stretch, with the outlook clouded by what happens with inflation.

Should’ve done 50bps. Only 25bps is to protect over leveraged home owners with mortgages, at the expense of everyone else (wage earners, savers, retirees on fixed incomes) suffering from double-digit grocery bills & shelter costs. Household debt servicing ratios at record highs!

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