AUSTRALIA: RBA LIFTS INTEREST RATES, ADDING TO MORTGAGE PAIN

The Reserve Bank of Australia has raised interest rates to a decade high, putting mortgage holders under even more strain as it seeks to cool soaring prices.

The Reserve Bank of Australia (RBA) raised the benchmark rate, which determines how much commercial banks charge for loans, by a quarter percentage point to 3.1 percent on Tuesday.

The increase, combined with six previous increases since May, adds more than $1,000 Australian dollars ($672) to the monthly cost of an average mortgage.

The move follows a smaller than expected quarter-percentage point hike in October that diverged from the aggressive stance of counterparts such as the United States Federal Reserve.

RBA Governor Philip Lowe said inflation remained too high at 6.9 percent, far above the target of 2-3 percent.

“Global factors explain much of this high inflation, but strong domestic demand relative to the ability of the economy to meet that demand is also playing a role,” Lowe said in a statement.

“The board expects to increase interest rates further over the period ahead, but it is not on a pre-set course,” he said. “It is closely monitoring the global economy, household spending and wage and price-setting behaviour.”

He added that the central bank remains “resolute in its determination to return inflation to target” and will do “what is necessary to achieve that”.

The RBA noted that the labor market remains tight, with unemployment standing at 3.4 percent in October — the lowest level since 1974 — and many businesses struggling to find workers. Nonetheless, there are indications that the rate hikes are already cooling the economy.

In Australia, inflation slowed to 6.9 percent in October, while home prices fell for the seventh consecutive month in November, weighing on household wealth and could curb consumer confidence and consumption over the months ahead.