The Reserve Bank of Australia has hiked interest rates for the second month in a row as war in the Middle East compounds inflation concerns.<\/p>\n
In a split five-four decision on Tuesday, the central bank’s monetary policy board lifted the cash rate by 25 basis points to 4.1 per cent, following a hike of the same size in February.<\/p>\n
The move was tipped by the majority of economists and money markets, which had priced in the chance of a hike at more than two-thirds.<\/p>\n
Domestic price pressures, including a tight labour market and strong economic growth, were already pushing inflation too high for the RBA’s liking before the US-Israeli attack on Iran led to the closing of the Strait of Hormuz and plunged global energy markets into chaos.<\/p>\n
Headline inflation rose 3.8 per cent in the year to January, according to monthly data released by the Australian Bureau of Statistics, above the RBA’s 2-3 per cent target band.<\/p>\n
The Reserve Bank has in the past been loath to move rates at meetings not immediately following the release of quarterly inflation figures, when it can get a gauge of its preferred measure of underlying price growth – the quarterly trimmed mean.<\/p>\n
But as the benchmark oil price spiked from about $US70 a barrel to as high as $US119 a barrel and inflation expectations soared, precedent seemed less important.<\/p>\n
Ahead of the decision, money markets were almost fully priced in for two further rate rises in 2026, which would bring the cash rate to 4.6 per cent by Christmas.<\/p>\n
Each 25 basis point rise adds about $90 in monthly repayments to a typical owner-occupier home loan of $600,000.<\/p>\n
Attention now turns to what tone governor Michele Bullock strikes in her post-meeting press conference, as traders try to guess how many more hikes the RBA has in store.<\/p>\n
CreditorWatch chief economist Ivan Colhoun said the RBA’s decision was justified.<\/p>\n
“While this is news that is unwelcome for both households and businesses, neither is the situation where inflation is allowed to run above-target for a further extended period,” he said.<\/p>\n","protected":false},"excerpt":{"rendered":"
The Reserve Bank of Australia has hiked interest rates for the second month in a row as war in the Middle East compounds inflation concerns. In a split five-four decision on Tuesday, the central bank’s monetary policy board lifted the cash rate by 25 basis points to 4.1 per cent, following a hike of the […]<\/p>\n