'Recession roulette': Economists, banks, borrowers left stunned by RBA's return to rate rises

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The Reserve Bank of Australia has shocked borrowers and financial markets by resuming interest rate rises after a one-off pause last month.

The RBA has raised interest rates for an 11th time since it started lifting them in May last year.abc.net.au/news/rba-interest-rate-rise-may-2023/102292616The Reserve Bank of Australia has shocked borrowers and financial markets by resuming interest rate rises after a one-off pause last month.The cash rate is now at its highest level since it was cut to 3.75 per cent in May 2012It has lifted its cash rate target from 3.6 to 3.85 per cent, marking the 11th increase in the space of a year.

The move caught most traders by surprise, with the market only pricing in a 13 per cent chance of rates rising ahead of the RBA's 2:30pm AEST announcement. While the majority of the major bank economists were also tipping the rate to remain on hold this month, two had been forecasting that it had reached the peak of the rate-hike cycle at 3.6 per cent.

"Given the importance of returning inflation to target within a reasonable timeframe, the board judged that a further increase in interest rates was warranted today."

 

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