The outcome of the Melbourne Cup was shocking, but the result of the Reserve Bank’s latest board meeting was not as surprising, with official interest rates lifted by 25 basis points to 3.5 percent.
As widely tipped by economists, the Reserve Bank lifted interest rates by 25 basis points in order to keep inflation under control.
“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,” RBA Governor Glenn Stevens said in the statement.
”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,” he said.
The quarter-point increase will add about $45 to the average monthly payment for a typical 25-year, $300,000 mortgage if passed on in full by commercial banks.
Federal Treasurer Wayne Swan said the rate rise will be tough on families and businesses, but rates could not stay at emergency lows for ever.
“Because the economy is recovering we’ll see changes to rates from time to time,’’ Swan said.
Economy will grow and rates will rise
Investment commentator says too early to raise rates
