THE Reserve Bank of Australia (RBA) has raised its official interest rate by 25 basis points to 3.5 percent.
Punters were being told to back the rate rise as the Reserve Bank met today, Melbourne Cup Day, to make their decision. The decision was announced at 1.30pm AEST.
Most economists were correctly betting on an interest rise of 25 basis points.
"The global economy has resumed growth," the RBA said in a statement, "With economic policy settings likely to remain expansionary for some time, the recovery is likely to continue during 2010 and forecasts have been revised higher."
The RBA attributed the rise to "stronger than expected" economic conditions in Australia and a "growth in confidence", adding the recovery of the global economy was likely to continue during 2010.
"With the risk of serious economic contraction in Australia now having passed, the Board’s view is that it is prudent to lessen gradually the degree of monetary stimulus that was put in place when the outlook appeared to be much weaker.
"The adjustments at the October and November meetings will work to increase the sustainability of growth in economic activity and keep inflation consistent with the target over the years ahead."This is the second rise in as many months as the bank continues to warn of a move away from emergency levels.
The last rise was in October, where the bank raised the official cash rate from the 49-year low of 3 percent to 3.25 percent. It was the first rise in 19 months and costs the average homeowner an additional $45 a month on their loan.
The government's delivery of a better-than-expected economic forecast on Monday was widely tipped to be another portent of gloom for homeowners.Did you know...
- The Reserve Bank interest rate was 17.5 per cent in 1990. See RBA's interest rate or cash rate target for more information (or see the table below).
- The Reserve Bank interest rate reached 7.25 per cent in March 2008 before plummeting to a 49-year low in April 2009.
Keep up-to-date with the latest information on interest rates at the Reserve Bank of Australia website.
Read about the last interest rate rise: Interest rates rise to 3.25 percentRecent history of interest rates in the news
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