The Reserve Bank board has lifted the official cash rate from 3.6 per cent to 3.85 per cent in a surprise move just a week out from the federal budget, amid signs households are continuing to feel cost-of-living pressures.
The Australian share market plunged after the rates decision, with the S&P/ASX 200 down or 0.7 per cent just after 2.30pm.The increase in the cash rate – now at its highest level in 11 years – comes a year after the central bank started raising it from the historic low of 0.1 per cent in a bid to tackle inflation.
“Given the importance of returning inflation to target within a reasonable timeframe, the board judged that a further increase in interest rates was warranted today.” Chalmers said the budget on May 6 would prioritise “responsible cost of living relief” that didn’t add to inflation. While inflation has declined from its December peak of 7.8 per cent, Lowe said inflation for services was still very high and potentially still rising. The jobs market also remains tight, with figures from last week showing the unemployment rate remained at the near 50-year low of 3.5 per cent, and many businesses were still struggling to hire workers.
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