The Reserve Bank of Australia increased the cash rate to its highest level in more than ten years, which will result in an increase in annual mortgage payments of $12,000 for the average Australian compared to this time last year.
The cash rate will increase by 25 basis points to 3.35 percent, the RBA board announced on Tuesday.
The first of the big four banks to respond was ANZ, which declared that it would pass on the entire 0.25 percent hike beginning on February 17 just hours after the RBA meeting on Tuesday afternoon.
The cash rate has increased by the RBA to its highest level since September 2012.
It is the ninth increase in as many meetings as the RBA works to control inflation, which peaked in the December quarter at a 30-year high of 7.8%.
The board was attempting to address inflation, which RBA Governor Philip Lowe said would take “some time” to return to the desired level of 2 to 3%.
According to him, “high inflation makes life tough for individuals and harms the efficiency of the economy.”
“And it would be exceedingly expensive to lower later if high inflation were to get established in people’s expectations.”
Following this increase, Commonwealth Bank predicts a halt. NAB thinks the cash rate will peak in March at 3.6%, while Westpac and ANZ predict it will do so in May at 3.85%.
Lowe acknowledged that future interest rate increases will be necessary.
