Reserve Bank raises interest rates for fourth-straight month

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The Reserve Bank has increased interest rates for the fourth month in a row, raising its cash rate target by half a percentage point.

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The RBA has now lifted its benchmark interest rate by 1.75 percentage points since its first rate rise in May, with the cash rate target sitting at 1.85 per cent.

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In his post-meeting statement, Reserve Bank governor Philip Lowe said the latest rate rise was unlikely to be the last this year.

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"The board expects to take further steps in the process of normalising monetary conditions over the months ahead, but it is not on a pre-set path," he said.

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"The size and timing of future interest rate increases will be guided by the incoming data and the board's assessment of the outlook for inflation and the labour market.

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"The board is committed to doing what is necessary to ensure that inflation in Australia returns to target over time."

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"We think their cash rate could have a 3-handle on it by the end of this year, because inflation is running at its fastest rate since the early 1990s," she told The Business.

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Mr Lowe acknowledged that would be a difficult task.

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"The board places a high priority on the return of inflation to the 2-3 per cent range over time, while keeping the economy on an even keel," he warned.

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The managing director of EQ Economics and former ANZ Bank chief economist, Warren Hogan, warned that a recession was a "real risk" if the Reserve Bank raised interest rates too fast.

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"I think they just need to be patient with this tightening cycle and try and get this inflation under control over a couple of years, rather than rush it and try and get it done within a year," he cautioned.

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"I think they just need to be patient with this tightening cycle and try and get this inflation under control over a couple of years, rather than rush it and try and get it done within a year," he cautioned.