RBA announces September interest rate hike to 2.35%

The Reserve Bank of Australia (RBA) has announced another interest rate rise by 50 basis points just today after their Board meeting, bringing interest rates to 2.35%.

Interest rates have not risen this quickly in 28 years, with the figure a touch above zero at 0.35% just this past May. This brings interest rates to the highest levels since December of 2014.

Dr Philip Lowe, Governor of the RBA, says that “The further increase in interest rates today will help bring inflation back to target and create a more sustainable balance of demand and supply in the Australian economy.

“The Board expects to increase interest rates further over the months ahead, but it is not on a pre-set path. The size and timing of future interest rate increases will be guided by the incoming data and the Board's assessment of the outlook for inflation and the labour market.”

Though interest rates are expected to increase in the coming months, experts such as Gareth Aird, Commonwealth Bank’s chief economist, have reason to believe that we have seen the worst of it.

“This may be the last 50-point hike in 2022, with one more 25-point hike expected to follow before the RBA will likely pause for a few months to fully assess the economic impact of the past rate hikes,” Mr Aird explains.

Natasha Vojvodic, Head of Australian Structured Finance at credit analysis company Fitch Ratings, says that “people are finding jobs, gaining more hours of work, and receiving higher wages. Many households have also built up large financial buffers and the saving rate remains higher than it was before the pandemic.”

With unemployment at a record low of 3.4%, the lowest it has been in 48 years, many Australians are keeping up with repayments.

“The Board will be paying close attention to how these various factors balance out as it assesses the appropriate setting of monetary policy,” says Dr Lowe.

“The Board is committed to doing what is necessary to ensure that inflation in Australia returns to target over time.”

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