Overview
- The Reserve Bank of Australia increased the cash rate by 25 basis points to 3.85%, reversing part of last year’s easing after a surprise rebound in inflation and resilient labour data.
- Updated forecasts revised up growth and inflation and used a technical assumption of roughly 60 basis points of additional tightening this year, with inflation expected to stay above target for an extended period.
- Commonwealth Bank, NAB and Westpac said they will pass on the full 25 basis points to variable mortgage customers, adding about $90 a month to a $600,000 loan, with other lenders expected to follow.
- Markets boosted odds of another move by May, and some bank economists now project the cash rate could reach about 4.10% if incoming data fail to ease price pressures.
- Governor Michele Bullock cited stronger-than-expected demand, tighter capacity constraints, a resilient global backdrop and uncertainty that financial conditions are restrictive, while widespread mortgage buffers may limit the immediate hit to spending and could necessitate further tightening.