The Reserve Bank of Australia has raised the cash rate to 4.6% from 4.35%, taking the key rate to its highest level since late 2011 as it battles persistent inflation.

The fourth rate hike this year will add about A$120 a month to the average mortgage of $730,000. Over the course of the year, the four rate rises have added about $480 a month to the average family’s repayments, dampening spending elsewhere in the economy.

The decision highlights the increasingly difficult trade-off facing the RBA: inflation is still too high, but the economy is already losing momentum and the housing market is weak.

The challenge now is whether the RBA can bring inflation under control without causing a sharper slowdown than intended – or even a recession.

Asked specifically about the risk of recession, RBA Governor Michele Bullock told reporters it was not the bank’s central case “at this point”.

Inflation seems stuck above 3%

The RBA explicitly left the door open to another rate increase, saying:

The board will continue to do what it considers necessary to bring inflation sustainably back to target, including increasing the cash rate target further if needed.

The board will continue to do what it considers necessary to bring inflation sustainably back to target, including increasing the cash rate target further if needed.

After weeks of warnings on inflation from senior RBA officials, the board’s decision was unanimous.

The RBA said some of the risks of higher inflation it identified in August are now materialising.

The........

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