When the RBA board next meets, I believe there’s a better-than-even chance it will raise rates for the first time in nine months to 4.6 per cent, the highest level in nearly 13 years. And it may not be the last time.

With interest rates having already risen at a record pace and inflation already well down from its peak, you might be forgiven for wondering why further pain could possibly be necessary, particularly if you’re a mortgage holder.

Treasurer Jim Chalmers and RBA governor Michele Bullock.Credit: AFR

There are two drivers of the need for further hikes. But first, some context.

The first clear sign that inflation would be a problem came on April 27, 2022, just two weeks into the 2022 federal election campaign. The prior few inflation prints had bounced around a bit, which was chalked up to post-pandemic indigestion. But the March quarter inflation print spiked to 5.1 per cent, prompting the RBA to begin raising rates the following month. This came just a few weeks after the Coalition’s final budget, which included some big new pre-election spending.

Over the next 18 months, the RBA raised rates by 4.25 percentage points, the most rapid tightening cycle of the modern era. Meanwhile, core inflation (excluding volatile items) peaked at 7.3........

© WA Today