RBA Hikes Interest Rates to Highest Level Since 2011
The Reserve Bank of Australia (RBA) has increased interest rates for the first time in two years, hiking them to their highest level since 2011. The cash rate now stands at 4.6 percent after a unanimous decision by the central bank's board. This move was widely expected by markets, which had priced in another rate rise by February.
The RBA cited hotter-than-expected inflation and rising oil prices as reasons for the increase. Analysts are closely watching RBA governor Michele Bullock's post-meeting press conference for signs of where the bank might move next. The higher interest rates will see the average owner-occupier variable rate rise to 6.49 percent, according to financial comparison site Canstar.
HSBC chief economist Paul Bloxham warns that falling house prices, slower consumer spending, and weaker construction could contribute to a rising risk of recession in coming quarters. If the economy deteriorates further, the RBA's resolve on getting inflation back to target might be tested.