The Reserve Bank governor Philip Lowe says the rise is necessary due to the “resilience” of the economy and high inflation.
The Reserve Bank of Australia continued its hawkish pivot on Tuesday by lifting the cash rate from 0.35 per cent to a surprise 0.85 per cent in a move that blindsided most economists.
“Higher prices for electricity and gas and recent increases in petrol prices mean that, in the near term, inflation is likely to be higher than was expected a month ago. “It will also make it more expensive for the Commonwealth government to service that trillion dollars of debt in the budget,” Dr Chalmers said.
Marcel Thieliant, economist at Capital Economics, said Tuesday’s move suggested the peak in the cash rate would be higher than most expected.“We suspect that the bank will hike by another 50 basis point in both July and August and perhaps even longer. As such, we are comfortable with our above-consensus forecast that rates will peak at 3 per cent by early-2023.”
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