CANBERRA, Australia (AP) — Australia’s central bank on Tuesday boosted its benchmark interest rate for a fifth consecutive month to a seven-year high of 2.35%.
The Reserve Bank of Australia’s decision was the cash rate’s fourth consecutive hike of half a percentage point.
When the bank lifted the rate by a quarter percentage point at its monthly board meeting in May, it was the first rate hike in more than 11 years. It’s now at its highest point since Feb. 2015, when the bank cut the rate from 2.5% to 2.25%.
Reserve Bank Gov. Philip Lowe said there were more rate hikes ahead at monthly board meetings as directors attempt to reduce inflation to a target band of 2% to 3%. Australian inflation is running at 6.1% and the Treasury Department expects it to peak at 7.75% in the December quarter.
“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,” Lowe said in a statement.
“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 labor market,” Lowe added.
Some economists fear the bank will tip the economy into recession by boosting rates too quickly.
Lowe said his board was attempting to curb inflation “while keeping the economy on an even keel.”
“The path to achieving this balance is a narrow one and clouded in uncertainty, not least because of global developments,” Lowe said.
Treasurer Jim Chalmers described the rate hike as “very difficult news for a lot of Australians with a mortgage.”
He said a mortgage-holders with a typical home loan debt of 500,000 Australian dollars ($340,000) would have to find an extra AU$145 ($99) a month to service their debt in addition to the extra AU$475 ($323) they have had to find to since rates started rising in May.
“It is our job to do what we responsibly can to help Australians deal with these pressures in the near term and to build a much more resilient economy into the future that is able to withstand some of those global and domestic shocks,” Chalmers told Parliament.
The government will introduce bills to Parliament by next week that would reduce the costs of medicines and child care.