Australia’s central bank has bumped up interest rates by another 25 basis points, taking the official cash rate to 3.6 per cent.

The 0.25 percentage point hike is the 10th in a row and brings interest rates to their highest point in 11 years.

The increase will pile more pressure on mortgage holders who are already feeling the heat from increasing costs.

The hike will add more than $1000 to the average monthly mortgage compared with levels in April 2022, Finder analysis shows.

The Reserve Bank has been hiking interest rates aggressively to tackle inflation, which came in at a hotter-than-expected 7.8 per cent in the December quarter – its highest level since 1990.

RBA governor Philip Lowe said further tightening of monetary policy was expected.

“The board expects that further tightening of monetary policy will be needed to ensure that inflation returns to target and that this period of high inflation is only temporary,” he said.

“In assessing when and how much further interest rates need to increase, the board will be paying close attention to developments in the global economy, trends in household spending and the outlook for inflation and the labour market.”

There was little doubt the bank would hike by another 25 basis points and analysts were more interested in the RBA governor’s language after adopting a hawkish tilt in recent communications.

The wording from the February decision implied at least two more interest rate rises would be needed to return inflation within the two-three per cent target range and stop high inflation becoming entrenched.

But since then, official December quarter wages and national accounts data have come in softer than expected, prompting speculation a pause was closer than first thought.

Poppy Johnston
(Australian Associated Press)