It also surpassed the precursory data of 0.85%, marking the third consecutive increase. Eventually, the central bank pointed to a 125 basis point increase since May, the fastest series of moves since 1994.
Accordingly, RBA flagged more rate hikes as it struggled to contain the mounting inflation. Governor Philip Lowe stated that the board would take further steps in the process of normalizing monetary conditions in Australia. This statement came in despite the persistent risks of triggering an economic downturn.
In line with this, the local dollar eased slightly in reaction to $0.6863 while futures narrowed the odds on another half-point hike in August.
Meanwhile, the Reserve Bank of Australia was confident that the economy could withstand the downturns. Subsequently, Aussie unemployment hovered above the five-decade lows of 3.90%, and job vacancies were at all-time highs.
Consequently, household demand recently gained strength. This is amid the 260.00 billion Australian dollars ($178.59 billion) in extra savings achieved during the pandemic lockdowns.
Nevertheless, the higher borrowing costs could weigh on spending power. The households owe A$2.00 trillion in mortgage debt, and home values have started to decline after a bumper in 2021.
Australia’s central bank hikes have added around A$400.00 monthly in repayments to the average A$620,000.00 mortgage.
Still, the Reserve Bank of Australia struggled to combat sticky inflation despite the straight increases.
In addition, recent floods across the east coast will add to the pain by fueling prices for vegetables and fruit.
Market participants now look forward to the release of the consumer price inflation for the second quarter later this month. The highly anticipated figure reveals another alarming upsurge to 6.00%. The projection mirrors levels not seen since the start of the national sales tax in 2000.
Eventually, Australia’s core inflation could advance by 4.00% and further away from the RBA’s target band of 2.00% to 3.00%. This anticipated figure is a significant reason market priced for another half-point hike in August.