AGENCY – Australia’s central bank took a fresh swipe at surging inflation Tuesday, raising interest rates for the third time since May in a move bound to inflict pain on highly indebted homeowners.
The bank said it would push up Australia’s main lending rate by a hefty half a percentage point to 1.35 percent, repeating an increase of the same scale last month. Reserve Bank of Australia governor Philip Lowe vowed to take “further steps” in the months ahead to tame inflation, which rose to a 20-year high of 5.1 percent in the first quarter of the year.
Global inflation is being fed by the war in Ukraine, strong demand and Covid-19 disruptions to supply chains, Lowe said in a statement. In Australia, a tight labour market and east coast floods were also pushing up prices, he said. It marks the first time on record the central bank has enacted increases of half a percentage point in two consecutive meetings.
“However, the governor’s statement made no reference to that historical precedent, something that may have been done if he was signalling the intention to scale back the moves,” said Westpac economist Bill Evans. He predicted the bank would decide on another increase of the same scale next month.
The central bank began to tackle inflation in May when it raised rates for the first time in more than a decade, pushing them up by a quarter of a percentage point to 0.35 percent.
For a homeowner with a Aus$500,000 (US$340,000) variable rate mortgage, average monthly repayments have climbed by Aus$366 since rates started rising, said real estate analyst CoreLogic.
“Indebted households are in the grip of a tightening pincer movement, where inflation on essential goods such as fuel and food, together with the rapidly rising cost of debt, are squeezing balance sheets,” it said in a report.-(AFP)