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NEWS: RBA increases interest rates

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News Coverage

This ABC article provides the facts, and discusses some of the likely impact of this increase in interest rates. Worth a read.

ABC News: Reserve Bank raises interest rates, ‘expects that further increases will be needed’:

The Reserve Bank has raised interest rates for the ninth meeting in a row, taking the cash rate target to its highest level since September 2012.

The 0.25 of a percentage point increase at today’s RBA board meeting leaves the benchmark rate at 3.35 per cent, with average variable mortgage rates now topping 6 per cent.

The increase adds a further $114 a month to repayments on a $750,000 home loan, taking the total increase in mortgage costs to $1,362 a month for such a borrower since rates started rising in May last year. [Read more]

RBA Cash Rate, visualisation from ABC News, click through for an interactive version.

The Reserve Bank Governor explains the RBA’s interest rate decisions each month in a statement on monetary policy. These are brief, and worth a read.

RBA: Statement by Philip Lowe, Governor: Monetary Policy Decision:

Global inflation remains very high. It is, however, moderating in response to lower energy prices, the resolution of supply-chain problems and the tightening of monetary policy. It will be some time, though, before inflation is back to target rates. The outlook for the global economy remains subdued, with below average growth expected this year and next.

The Board’s priority is to return inflation to target. High inflation makes life difficult for people and damages the functioning of the economy. And if high inflation were to become entrenched in people’s expectations, it would be very costly to reduce later. The Board is seeking to return inflation to the 2–3 per cent range while keeping the economy on an even keel, but the path to achieving a soft landing remains a narrow one.

Additional coverage

Alan Kohler also had a good segment on ABC news last (7 February), it should be available here shortly.

Background

For a quick introduction to the role of the Reserve Bank in setting interest rates, check out this infograph from the RBA on ‘Monetary Policy in Australia’.

The following video covers the same ground in a little more detail.