RBA Hikes Cash Rate to 4.60% Amid Elevated Inflation Concerns

The Reserve Bank of Australia (RBA) has increased the cash rate target to 4.60 per cent, up from 4.35 per cent, in response to elevated inflation levels. The decision was unanimous, with the RBA concerned about the current state of inflation.

Cullen Haynes, director of sales at Accounting Home Loans, said that while today's cash rate hike was anticipated, it will have a significant impact on mortgage repayments. He noted that every 25-basis point increase adds approximately $161 per month to repayments on a $1 million mortgage and can reduce borrowing capacity by around $30,000 to $40,000.

AMP chief economist Shane Oliver expressed concern that the RBA's wait-and-see approach may further erode its credibility. He noted that cooling growth and the housing downturn should start to take pressure off inflation, but it is still early days.

University of Sydney professor James Morley predicted that the central bank will likely raise rates at the next meeting unless future data eases its concerns about inflation. He stated that labour market conditions are weakening, but the RBA sees the economy as being close enough to a level of potential such that real economy won't be playing much role in pulling inflation down.