The RBA today lifted the cash rate from 4.1% to 4.35%, back to its highest point in 15 years, effectively undoing the three rate cuts which were delivered last year.

“Today the RBA made the wrong decision,” said Matt Grudnoff, Senior Economist at The Australia Institute.

“Higher interest rates will do nothing to open the Strait of Hormuz. Higher interest rates cannot change the world price of oil and bring down fuel prices.

“All this does is heap more pain on already stretched households.

“The only tool the RBA has to fight inflation is to change interest rates. But interest rates are ineffective at stopping inflation caused by supply shocks.

“It has chosen to do something, even if that will make things worse, rather than risk being accused of doing nothing.

“Higher fuel costs and now a third interest rate increase this year is likely to impact economic growth and push unemployment higher. This will have real negative impacts on Australian households and businesses.

“If the RBA goes too hard with interest rate increases, it risks pushing the Australian economy into recession. It will then be forced to rapidly lower interest rates to stimulate the economy, which would be a humiliating backflip.