Interest rates rose five months in a row, and the increase period felt surprisingly sudden to borrowers. It was not until late 2020 when Reserve Bank governor Phillip Lowe said rates probably would not increase again until 2024. But the official cash rate target has been rising each month since April of this year, ranging from 0.10-0.35 per cent. That is a rise of 2.25 per cent over five months, the fastest rise in almost three decades.
The Government and RBA have announced a new, audacious goal to hold inflation between two and three per cent for this cycle. This is because Australia’s economy struggled with high inflation through the 70s and 80s. And as Australia fell into recession in the early 1990s, so did inflation — down to about 2%. So when inflation threatened to soar in 1994, the Reserve Bank moved quickly to suppress it.
RBA officials wanted everyone to know that their new regime of a targeted inflation rate was working precisely because they were going to raise interest rates when needed. So, that is precisely what they did. The RBA increased interest rates by 0.75 per cent, up to 5.5 per cent, to try to keep this inflation rate down and stable.