Rates rise by 25 basis points

The central bank has pulled the trigger on another 25 basis point rate rise, taking the official cash rate to 2.85 per cent.

The Reserve Bank of Australia (RBA) today (Tuesday, November 1) opted for another smaller 0.25 percentage point lift despite some speculation of another 0.5 percentage point lift off the back of hotter-than-expected third quarter inflation.

The RBA has been hiking interest rates aggressively since May to temper inflation, which hit 7.3 per cent in the September quarter.

It hiked 25bps in May before four consecutive 50bps between June and September.

The RBA then shifted gears back to a 25bp hike in October, with the central bank recognising the official cash rate was already quite high and it takes time for the economy to respond to rate hikes.

CreditorWatch chief economist Anneke Thompson said the latest rate rise will lock in a slowdown in consumer spending during the usually busy Christmas period.

“Today’s decision by the RBA to further raise the cash rate will place undeniable financial pressure on Australian households,” Ms Thompson said.

Compared to pre-hikes, a 0.25 percentage point lift will push monthly repayments up by $760 for a mortgage holder $500,000 in debt with 25 years remaining on the loan, RateCity analysis shows.

Ms Thompson said there were several signs of economic trouble in 2023.

“The RBA board will likely have carefully considered labour force data, which showed that the unemployment rate has stagnated at 3.5 per cent, employment growth has slowed dramatically, and job vacancies have stopped rising,” she said.

– WITH AAP