What happened
The Reserve Bank of Australia raised the official cash rate by 0.25 percentage points to 4.60 per cent, reaching a 15-year high. Headline inflation reached 4.0 per cent in August with underlying inflation at 3.6 per cent. Deloitte Access Economics noted the board's tolerance for persistent inflation has fallen, driven by Middle East energy shocks and solid domestic demand.
Why it matters here
Higher official cash rates directly increase borrowing costs for Australian households and property investors, squeezing disposable income and softening consumer spending. Persistent inflation also increases the yield required on fixed-income investments and equities, pressuring growth-oriented equity valuations across the market.
What to watch
Watch the RBA board's next monetary policy meeting in November, where economists forecast another 25 basis point rate increase if underlying inflation remains above target.
Source
deloitte.com