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RBA hikes rate

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The Reserve Bank of Australia (RBA) has lifted the official cash rate for the first time in six months.

At its board meeting today, the RBA judged now was a good time to lift the official cash rate 25 basis points to sit at 4.75 per cent.

Weak economic data had left many split as to whether the RBA would raise the cash rate as a preemptive strike against expected inflation pressures emanating from the mining boom, or sit pat for another month.

Last week, underlying inflation for the year to September eased to a five year low of 2.4 per cent – dropping to the bottom half of the RBA’s 2 to 3 per cent target band, according to the Australian Bureau of Statistics.

But despite the fact that CPI came in within the RBA’s target range of 2 to 3 per cent according to their preferred measures, clearly the Board thought it was better the raise interest rates sooner rather than wait and potentially let inflation get out of hand.

RP Data’s research analyst Cameron Kusher said today’s decision by the RBA would almost certainly soften the housing sector further resulting in fewer buyers and continuing weakness in housing finance, clearance rates and building approvals.

“With continuing weakness in the housing sector: flat growth in home values over the last month, auction clearance rates consistently below 60 per cent, weak housing finance numbers and deteriorating building approvals, the increase to official interest rates does not bode well for the housing market,” he said.

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