A rate rise was inevitable. The real story is how the RBA got there

Tuesday’s decision by the Reserve Bank to raise interest rates by 25 basis points was critical. That was reflected in the 8-1 vote of the board, and also in the substance of the decision.

Even in February the RBA was in a tricky spot – albeit one of its own making. In the post-pandemic years the RBA thought it could raise rates a full percentage point or more less than comparable jurisdictions, maintain a hot labour market with historically low unemployment, and simply wait patiently for inflation to glide back to the 2.5 per cent midpoint of their target band.

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