Interest rates rise in November as RBA tackles fresh inflation fears

The Reserve Bank has hiked interest rates in November, ending a four month reprieve for mortgage holders amid renewed fears that inflation is not falling fast enough.

The cash rate target will rise 0.25 percentage points to 4.35 per cent, the highest level since 2011, adding another $78 to monthly repayments on a typical $500,000, 25-year home loan.

That’s on top of the more than $1100 that’s been added since May 2022, when hikes began, bringing the total squeeze to $1210 across 13 rises.

But it is the first increase since June, when the RBA began pausing rates as it awaited fresh data on the trajectory of inflation – figures that have since come in far hotter than anticipated.

RBA boss Michelle Bullock said on Tuesday that inflation is still too high, requiring action.

“Inflation in Australia has passed its peak but is still too high and is proving more persistent than expected a few months ago,” Bullock said.

“The latest reading on CPI inflation indicates that while goods price inflation has eased further, the prices of many services are continuing to rise briskly.

“While the central forecast is for CPI inflation to continue to decline, progress looks to be slower than earlier expected.”

Most economists expected the November hike after September quarter Consumer Price Index data last week was higher than forecast.

That threatens to derail the RBA’s desire to see underlying inflation ease from 5.2 per cent back to the 2 to 3 per cent target by late 2025.

Central bankers had already said in October that there was a “low tolerance” for upside risks to their late 2025 inflation reduction plans.

It is hoped that higher rates will help ease inflation faster by putting an even bigger brake on the economy, though households will bear the brunt again, amid record levels of mortgage stress.

Roy Morgan figures published last week found 1.57 million (or 30.3 per cent of mortgage holders) are now “at risk” of mortgage stress following more than a dozen rate hikes since May 2022.

That figure could get worse too with some experts already predicting a Christmas rate hike in December and Bullock on Tuesday leaving the door firmly open to another mortgage squeeze.

“Whether further tightening of monetary policy is required to ensure that inflation returns to target in a reasonable timeframe will depend upon the data and the evolving assessment of risks,” she said.

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