Reason Behind Rate Rise

The Reserve Bank of Australia has made its second consecutive monthly rate rise, revealing it has concerns about how the conflict in the Middle East and rising fuel prices will continue to affect inflation.

Although it predicts that inflation will remain above target for some time, the vote to lift interest rates was only marginally carried, with five members voting for it and four voting against it.

Australia’s major banks are already predicting further interest rate pain ahead, with many revising their forecasts this week to predict another rise when the RBA meets again in May.

Canstar data insights director Sally Tindall says major banks are likely to pass on the rise to customers within the next two weeks.

The two recent rate rises mean owners with a variable mortgage of $500,000 will be paying about $151 more per month.

RBA Governor Michele Bullock says higher petrol prices are not the only reason for the rate rise.

“Inflation was already too high, reflecting the fact that demand is outstripping supply; higher fuel costs will not slow demand enough on their own to address this,” she says.