RBA hikes rates by 25bps
The Reserve Bank of Australia has increased rates by 25bps, its seventh consecutive rise.
In its meeting today, the RBA increased rates from 2.6% to 2.85%.
This was the same size of rise as in October but smaller than the multiple 50bps increases seen earlier in the year.
Governor Phil Lowe said the decision had been taken on the basis on returning inflation to its target range.
"The board has increased interest rates materially since May. This has been necessary to establish a more sustainable balance of demand and supply in the Australian economy to help return inflation to target. The Board expects to increase interest rates further over the period ahead."
Rates were expected to peak at 3.35% by the end of the year.
Scott Solomon, associate portfolio manager of T. Rowe Price’s Dynamic Global Bond strategy, said: “Governor Lowe is intent on allowing effects from prior hikes to flow through to main street. He’s acutely aware that many mortgages are due to reset over the next couple of months and doesn’t want to unnecessarily burden the population.
“Furthermore, he’s quite proud of the levels of employment reached by the Australian economy and has zero desire to prematurely destroy that.”
AUTHOR
Laura Dew
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