RBA hikes rates to 4.85% for fifth time, Bullock says ‘pain now’ prevents worse later

The Reserve Bank of Australia raised the official cash rate to 4.85%, the highest level since 2008, marking its fifth consecutive hike. Governor Michele Bullock warned market participants that a pinch today will spare them a bigger blow later.

In the grand theatre of Australian finance, the RBA has handed market participants the script of a drama where the antagonist is a higher cash rate and the hero is a vague promise of future stability. The curtain has risen, the audience is uneasy, and the popcorn is priced at a rate that would make market participants wince.

Only time will tell if market participants will thank the RBA for its forward-looking pain or if they’ll be left clutching their wallets, wondering whether “pain now” was just a polite way of saying “welcome to the new normal”.