RBA expected to raise cash rate to 4.85 per cent on Tuesday

Summarised from 2 outlets · Updated 2 Nov, 19:08 · Archive

The Reserve Bank of Australia is widely predicted to announce a 25 basis point increase at 2.30pm on Tuesday, taking the official cash rate to 4.85 per cent. This would be the highest point since 2008, when the Reserve Bank rapidly cut rates during the global financial crisis.

Westpac chief economist Luci Ellis, who worked for the Reserve Bank for more than 30 years, says the impact extends beyond mortgage holders. Higher interest rates mean borrowers on variable rate mortgages have bigger repayments, leaving them less money to spend on other things, which dampens inflation. But the ripple effect is felt among all consumers and businesses.

Ms Ellis said higher interest rates discourage spending by mortgage holders and make it harder for both consumers and businesses to get credit due to higher repayments. 'High interest rates incentivise everyone to save more, borrow less and therefore spend less,' she said. The increases also reduce households' wealth through falling asset prices including property and can lift the Australian dollar, making imports cheaper and exports more expensive.

How it is being reported

• RBA tipped to lift cash rate to 4.85 per cent on Melbourne Cup dayRenters, savers and business owners face consequences from Tuesday’s expected rate rise, with a top economist warning no one escapes the RBA’s inflation fight.Perth Now · 2 Nov, 18:33
• RBA tipped to lift cash rate to 4.85 per cent on Melbourne Cup dayRenters, savers and business owners face consequences from Tuesday’s expected rate rise, with a top economist warning no one escapes the RBA’s inflation fight.The West Australian · 2 Nov, 18:32

In this story: Reserve Bank of Australia · Luci Ellis · Westpac

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