The Reserve Bank of Australia (RBA) has raised interest rates to a decade high, putting mortgage holders under even more strain as it seeks to calm soaring prices.
The RBA raised the benchmark rate, which determines how much commercial banks charge for loans, by a quarter percentage point to 3.1 percent on Tuesday.
The increase, combined with six previous increases since May, adds more than $1,000 Australian dollars ($672) to the monthly cost of an average mortgage.
The move follows a smaller-than-expected quarter-percentage-point increase in October, which deviated from counterparts such as the United States Federal Reserve’s aggressive stance.
According to RBA Governor Philip Lowe, inflation remains too high at 6.9 percent, far above the target range of 2-3 percent.
“Global factors explain much of this high inflation, but strong domestic demand relative to the ability of the economy to meet that demand is also playing a role,” Lowe said in a statement.
Lowe said he expected inflation to rise to 8 percent during the final quarter before easing next year.
“The board expects to increase interest rates further over the period ahead, but it is not on a pre-set course,” he said. “It is closely monitoring the global economy, household spending and wage and price-setting behaviour.”
He added that the central bank remains “resolute in its determination to return inflation to target” and will do “what is necessary to achieve that”.
The RBA noted that the labour market remains tight, with unemployment at 3.4 percent in October — the lowest since 1974 — and many firms struggling to hire workers.
Still, there are signs the rate hikes are already cooling the economy.