Bullock's reassuring rate hike
Today's rate increase from the RBA wasn’t a surprise. And for an institution still rebuilding trust, that is a good thing.
It didn’t take a blind guess to bet that Michele Bullock would raise interest rates on Melbourne Cup day. And that is a good thing.
Because after it got its earlier forecasts (that rates would remain at record lows) so drastically wrong, and with the economic stakes so high, markets and the public need to be able to trust the RBA.
The 25 basis point increase to 4.35% will be a bitter pill for borrowers to swallow, but there is a sweetener to help it go down: the RBA is proving that under Bullock it will stick to its guns.
This rate decision wasn’t a surprise. All big four banks were predicting the increase after hotter than expected inflation data. The RBA is simply doing what it said it would. It has repeated ad nauseam that should inflation remain stubbornly high, it won’t hesitate to act. The biggest tool it has for this job is interest rates.
