Australia‘s central bank broke a decade-long record of not increasing interests as the country prepares for central elections. The cash rate rose from 0.1% to 0.35%, marking the first spike in 11 years.

The rollout of an increased interest rate was forecast by experts and lawmakers after official data revealed a 5.1% jump in inflation through March. It is the highest annual rate since 2001, when a newly introduced 10% federal consumption tax created a temporary spike, Associated Press reported.

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The Reserve Bank of Australia aims to keep the country’s inflation rates between 2-3% with every policy change. However, this year’s inflation rates went beyond the bank’s expectations and forced the interest hike, bank governor Philip Lowe said.

With elections at stake, what to expect from the interest rate hike?

For the first time since 2007, Australia’s interest rates experienced such a dramatic change with the elections being right around the corner. And it did not end well for then-Prime Minister John Howard. 

Howard’s conservative government was voted out of office after more than 11 years in power just two weeks after the interest rates were hiked.

Now, Prime Minister Scott Morrison faces a similar challenge. His government is seeking a rare fourth three-year term at elections on May 21.

Opposition treasury spokesperson Jim Chalmers described the rate hike as a “full-blown cost of living crisis on Scott Morrison’s watch.”

Also Read: Why US inflation is going up and when will it come down

The impact of COVID-19

The restrictions that came along with the spread of COVID-19 in Australia introduced economical hurdles. However, Lowe said that the cash rate may continue to be at a record low of 0.1% till 2024. He was wrong.

The bank last increased interest rates in November 2010. The cash rate then rose a quarter of a percentage point to 4.75%.