Reserve Bank hikes official interest rate by 50 basis points to 0.85% to curb inflation

theguardian.com:

The Reserve Bank has announced the biggest single rise in the cash rate in 22 years as Australia’s central bank tries to quash inflation before it gets out of control.

The RBA board at its regular monthly meeting lifted its cash rate target 50 basis points to 0.85%. Economists were again surprised by the size of the move, having been mostly split between predicting a 25 or 40 point increase, according to Bloomberg.

The back-to-back monthly rate rises of a combined 75 basis points will add about $200 per month for a $500,000 loan compared with April, according to Tim Lawless, research director for property group CoreLogic.

Westpac was the first of the big banks to pass on the rise. “From 21 June, Westpac will increase home loan variable interest rates by 0.50% per annum for new and existing customers,” it said in a statement on Tuesday evening.

Households and businesses are already bearing higher costs for everything from food to construction materials and energy. To this load will be added larger repayment costs for those on variable loans with the main commercial banks likely to pass on today’s rate rise promptly.

“Inflation in Australia has increased significantly,” said the RBA governor, Philip Lowe, in a statement. “While inflation is lower than in most other advanced economies, it is higher than earlier expected.

“Inflation is expected to increase further, but then decline back towards the 2% to 3% range next year,” Lowe said. “Higher prices for electricity and gas and recent increases in petrol prices mean that, in the near term, inflation is likely to be higher than was expected a month ago.”

The treasurer, Jim Chalmers, earlier on Tuesday said “it’s going to be a difficult winter for a lot of people”.

“We have an