RBA hikes cash rate to 4.35 per cent as global oil crisis drives inflation
The cash rate has just been raised 25 points to 4.35 per cent by the Reserve Bank of Australia (RBA) on fears that the continuing oil crisis could lead to runaway inflation far beyond the bank’s target band of 2-3 per cent.
The announcement was made on Tuesday (May 5), just days after the Australian Bureau of Statistics released the latest Consumer Price Index data showing a 4.6 per cent rise over the quarter to March, the worst figure since 2023. It’s the third rate hike this year, so far, and means repayments on a $600,000 mortgage will have jumped by $300 a month since the start of the year.
The latest rate hike effectively wipes out all three interest rate cuts delivered to Australian households last year, returning the cash rate to where it stood before the easing cycle began. “We’re not at all surprised by the RBA increasing the cash rate this time,” said Gareth Spence, head of Australian economics at the National Australia Bank (NAB). “Inflationary pressures had been rebuilding, largely as a result of increasing oil prices with the war in the Middle East.
“That just didn’t allow a wait-and-see approach anymore; the RBA wants to make sure inflation goes down in a reasonable period of time. But now we hope we’ll have a period of a holding rate so we can observe what impact this new rate has on the economy and activity.”
The cash rate is now back to where it was in December 2024, a level previously reached before COVID in November 2011.
The rate rise follows the release of the quarterly inflation rate last week (April 24), forced up by the 6.5 per cent increase in the cost of housing, and the 8.9 per cent jump in transport costs, due primarily to March’s massive 32.8 per cent bump in fuel prices.
Trimmed mean inflation – a measure of underlying inflation – remained stable at 3.3 per cent, a figure still above the RBA’s preferred rate.
Source : www.domain.com.au/news/author/sue-williams/
