Australia’s central bank has pulled the trigger on a widely-expected 25 basis point interest rate hike aimed at driving down stubbornly high inflation.

The move takes the official cash rate to 4.35 per cent.

Provided banks pass the increase on to borrowers, the cash rate hike will add an extra $84 to monthly repayments for a $500,000 loan over 30 years.

The 0.25 percentage point increase follows four months on hold at 4.1 per cent, with the RBA moving to the sidelines to observe the impact of its aggressive tightening round started last year.

Though data released over the past month points to uncomfortably persistent price pressures that have put the central bank’s 2025 timeline for bringing inflation back to target in doubt.

Inflation has passed its peak though the 5.4 per cent annual growth through to the September quarter remains well above the RBA’s two-three per cent target range.

Most economists polled by Reuters were expecting a 25 basis point increase, with all four of the big banks leaning towards a Melbourne Cup day hike.

And more tightening may still be needed, RBA governor Michele Bullock specified.

“Whether further tightening of monetary policy is required to ensure that inflation returns to target in a reasonable timeframe will depend upon the data and the evolving assessment of risks,” Ms Bullock said in a post-meeting statement.

Poppy Johnston
(Australian Associated Press)