More rate rises on the cards as inflation proves hard to tame

The Reserve Bank could deliver a further 0.25 percentage point hike in the next few months, potentially as early as next Tuesday, after today’s CPI figures confirmed inflation has remained stubbornly high in some categories.

In a mixed bag of results, today’s monthly CPI figures from the ABS show annual inflation increased from 6.3 per cent in March to 6.8 per cent in April. While the rise was largely driven by the halving of the fuel excise a year ago, categories such as rent and travel remained elevated.

If the RBA does increase the cash rate to 4.10 per cent, either on Tuesday or in coming months, it will take it to the highest rate since the April 2012 meeting.

RateCity analysis shows another 0.25 percentage point rise would mean the average borrower with a $500,000 loan before the hikes started in May last year could soon be paying a total of $1,134 more a month. That’s a 49 per cent increase.

Impact of a 0.25% point hike to 4.1% cash rate: increase to monthly repayments

Source: RateCity.com.au. Based on an owner-occupier paying principal and interest with 25 years remaining. Starting rate is the RBA av. existing owner-occupier variable rate of 2.86% in April and assumes banks pass the hikes on in full.

How borrowers can get ahead of rate hikes

RateCity.com.au research director, Sally Tindall, said: “A lot of households had been hoping there would be a light at the end of the tunnel sometime soon. However, these inflation figures suggest there are many more tough months ahead for Australian families battling with the soaring cost of living and rising rates.”

“What we saw last month was an RBA Board, resolute in its determination to get the job of taming inflation done. Today’s inflation figures suggests that work may not be over,” she said.

“Inflation in Australia has remained stubbornly high in some categories and there’s every chance the RBA will hike rates again, as early as next Tuesday, to stay firm on its course.

“Borrowers should plan for one, if not two more rate hikes over the coming months. Call your bank and ask what your repayments would be if the cash rate gets to 4.35 per cent, and start planning out a new budget around these figures.

“If that budget doesn’t add up, starting taking action now while you still have time on your side,” she said.

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