The RBA has bowed to inflationary pressures and implemented the twelfth cash rate rise in less than two years, lifting it by 25 basis points, to 4.1 per cent.

Governor Philip Lowe said of the hike: “Inflation in Australia has passed its peak, but at 7 per cent is still too high and it will be some time yet before it is back in the target range. This further increase in interest rates is to provide greater confidence that inflation will return to target within a reasonable timeframe.

“High inflation makes life difficult for people and damages the functioning of the economy. It erodes the value of savings, hurts family budgets, makes it harder for businesses to plan and invest, and worsens income inequality. And if high inflation were to become entrenched in people’s expectations, it would be very costly to reduce later, involving even higher interest rates and a larger rise in unemployment.”

The RBA notes that, while goods price inflation is slowing, services price inflation is still very high, especially in overseas markets.

It also points to the possibility of further rate rises to ensure that inflation returns to target in a reasonable timeframe. Lowe notes “that will depend upon how the economy and inflation evolve.”

“The Board will continue to pay close attention to developments in the global economy, trends in household spending, and the outlook for inflation and the labour market. The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that,” he concludes.