RBA Hikes Cash Rate Despite Commonwealth Bank's Pre-emptive Move

The Reserve Bank of Australia (RBA) raised its official cash rate by a quarter point to its highest level in about a decade and a half, taking it to 4.75%. This decision was made despite Commonwealth Bank (ASX:CBA), the nation's largest lender, having already anticipated the move by raising one of its fixed home loan rates last week.

The RBA stated that inflation remains elevated and some upside risks flagged at its previous meeting are now materializing. The bank also cited further disruptions to global oil supply as adding to price pressures. The decision was unanimous, with the board leaving the door open for more tightening if needed.

Commonwealth Bank's fixed rate increase last week was seen as a sign that the bank expected a short-term lift in funding costs. The banks economists had also changed their view, bringing forward their calls for the next rate rise from November to September. However, they still expect the central bank to start cutting again next year, although the timing of that easing has been pushed back.

The RBA's statement highlighted concerns about mortgage stress and arrears, with housing prices having fallen in most capital cities and new housing loans declining noticeably. The nation's largest home lender is expected to see a decrease in volume growth due to slower housing credit, making it more challenging for borrowers already struggling.