Australia Raises Rates to 10-Year High

In its eighth hike in eight months, the Royal Bank of Australia (RBA) on Tuesday raised interest rates by 0.25% to a 10-year high of 3.1% while doubling down on its stance that more hikes will be needed to slow inflation.

Australia Raises Rates to 10-Year High
Image credit: Reuters [via Al Jazeera]

Facts

  • In its eighth hike in eight months, the Royal Bank of Australia (RBA) on Tuesday raised interest rates by 0.25% to a 10-year high of 3.1% while doubling down on its stance that more hikes will be needed to slow inflation.
  • According to RBA Governor Philip Lowe, the bank expects interest rates to continue rising but added that the hikes are "not on a pre-set course."
  • At 6.9% over the year to October, Australia's inflation is well above the RBA’s target, with Lowe in a press release saying he expects it to peak at around 8% during the December quarter before declining next year.
  • Factoring in all rate hikes since May, the average monthly mortgage cost in Australia has reportedly increased by AUD$1000 ($672).
  • This follows October's 0.25% hike as Australia has been deviating from its counterparts' — such as the US Federal Reserve's — more aggressive rate increases.

Sources: Reuters, CNBC, Rba, and Al Jazeera.

Narratives

  • Establishment-critical narrative, as provided by AFR. The Australian people, specifically homeowners, deserve an apology from Philip Lowe and the RBA for the deception that has led to their financial hardship. Lowe repeatedly said that the official cash rate would not increase until 2024, leading many to buy homes not knowing the ensuing pain to come from the RBA’s actions.
  • Pro-establishment narrative, as provided by Al Jazeera. During difficult political and economic times, the Australian government is doing a good job. With October showing a slowdown in the pace of inflation, the RBA's rate hikes are already showing signs of cooling the economy. While these measures place a temporary burden on homeowners, in the long run, this is what will help curb the record prices.