Australia’s central bank has again raised interest rates the country’s sixth quarter per cent rate rise since October, after policy makers raised their outlook for inflation. The overnight cash rate target moves to 4.5% from 4.25%. The Reserve Bank of Australia has been under pressure, as Australia’s economy has been accelerating, stoking inflation.
Property prices have surged more than 20% in the 12 months to March. However, Australia’s currency fell after the move, and the general expectation is that the tightening cycle is nearing an end. “Don’t expect this pace of monetary policy tightening to continue in the months ahead,” said Ben Dinte, an economist at Macquarie Group.
Australia’s housing market is vulnerable to rate increases, as more than two-thirds of the population own homes, compared with less than 50% in many European countries. More than 90% of mortgages taken out last year were variable rate.
Commonwealth Bank of Australia, the country’s biggest bank, is increasing the rate on its variable home loan by 25 basis points to 7.36% on May 7.