How does interest rate hikes related to recession

As expected, the RBA has finally raised the cash rate target by 50 basis points to 1.35%.

High inflation driving interest rate hikes
The RBA highlighted that global inflation remains high, boosted by virus-related disruptions to supply chains, strong demand, and the war in Ukraine, which is putting pressure on productive capacity. While inflation in Australia is also high, it is not as high as in several other countries.

The RBA expects inflation to peak later in 2022 and then drop back towards the 2-3% range next year. Inflation is likely to ease as commodity prices stabilise and global supply-side problems continue to ease.

Uncertainty about Australia’s economic outlook
The behaviour of household spending is one source of ongoing uncertainty about Australia’s economic outlook.
While the latest spending data has been positive, household budgets remain under pressure from higher interest rates and higher prices. Meanwhile, property prices have plummeted in some markets over recent months, following large increases in recent months.