In a surprise move, the Reserve Bank of Australia (RBA) decided this week to increase the official cash rate by 50 basis points to .85%, in a bid to curb inflation. It follows last month’s rise of .25%, the first rise in eleven years, yet remains below the then-record low 1.0% reached in September 2019.
To further put this into perspective, the last time the RBA raised rates (apart from May 2022) was in March 2008, when the cash rate rose to 7.25%.
If passed on in full by the banks, the latest rise will add $133 a month to a loan worth $500,000 over 25 years, or $265 a month on a loan worth $1 million.
Most economists had been expecting the Board to move in smaller steps, but in a statement announcing the decision RBA Governor Philip Lowe said that it was taken now because of current inflation pressures in the economy, and the historically-low level of interest rates.
