Reserve Bank of Australia expected to raise cash rate to 18-year high

The board of the Reserve Bank of Australia meets on Tuesday and is widely expected to raise interest rates to an 18-year high, the Guardian, ABC News Australia, and Bloomberg reported. According to ABC News Australia, the central bank board is widely expected to lift the cash rate to 4.85 per cent. The Guardian and ABC News Australia both report that this decision would mark the fifth interest rate hike by the central bank this year. [1][2][6]

The expected rate increase follows warnings from senior central bank officials that inflation remains too high, ABC News Australia reported. The Guardian reported that for a borrower with an average-sized new mortgage of $731,000 who pays a typical rate of 6.2 per cent, a 0.25 percentage point rate rise would add approximately $119 to their monthly repayments of $4,596. [1][2]

According to the Guardian, New South Wales Premier Chris Minns rejected commentary from some economists that the decision by the central bank would be straightforward, noting that the board has a difficult choice to make. As FTMQ News reported earlier, Chris Minns warned that an expected rate rise by the Reserve Bank of Australia would cause job losses and business closures, while calling on federal and state governments to curb public spending. [1][12]

The decision takes place as a country's monetary authority manages monetary policy to achieve objectives such as price stability and high employment, while Bloomberg and the Wall Street Journal report that the country faces stubborn inflation and a deepening housing slump. InvestingLive reported that Deutsche Bank stands alone in predicting the Reserve Bank of Australia will keep rates on hold, while 31 of 32 surveyed economists tip a rate hike. [4][6][7][9][10]