Australia hikes key interest rate to 3.6% to fight inflation

CANBERRA, Australia (AP): Australia’s central bank increased its benchmark interest rate by another quarter-point to 3.6% Tuesday as it continues trying to tame inflation.

It was the 10th rate rise in a row by the Reserve Bank of Australia, bringing the rate to its highest point in 11 years. The increase will put more pressure on homeowners, with many already paying out hundreds of dollars each month more on their mortgages than they were a year ago.

The bank has been trying to counter inflation, which came in at a hotter-than-expected 7.8% in the December quarter, its highest level since 1990. The bank has an inflation target range of between 2% and 3%.

Reserve Bank Governor Philip Lowe warned there would likely be further rate hikes.

“The board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that,” he said in a statement.

But Lowe also said there were indications that inflation had peaked in Australia.

“Goods price inflation is expected to moderate over the months ahead due to both global developments and softer demand in Australia,” he said. “Services price inflation remains high, with strong demand for some services over the summer.”

Australian Treasurer Jim Chalmers told lawmakers that the inflation problem was global but that strained supply chains in Australia were contributing. He said somebody with a half-million dollar mortgage would be paying an extra 1,000 Australian dollars ($672) per month after all the recent rate rises.

“This will make life harder for many Australians who are already under the pump,” Chalmers said. “This was expected, it was flagged, the markets anticipated it, but it will still sting.”