The Reserve Bank of Australia today have put up official interests rates by 25 basis points, to 7.25%,the highest level in 12 years to try and stop inflation. The central bank last lifted the cash rate in February, also by 25 basis points.
RBA governor Glenn Stevens said the board had concluded that a further tightening in monetary policy was needed to bring the annualised inflation rate back into its comfort band of two to three per cent.
"As a result of this and earlier actions, and rises in borrowing costs which are occurring independently of changes in the cash rate, the overall tightening in financial conditions since the middle of 2007 is substantial," he said.
"The board will continue to evaluate prospects for economic activity and inflation in the light of new information."
Mr Stevens said inflation was likely to remain high in short term and could rise further this year.
"Inflation is likely to remain relatively high in the short term, and will probably rise further in year-ended terms before moderating next year in response to slower growth in demand," he said.
He noted that inflation was high in 2007, with an annual consumer price index increase of three per cent in the December quarter and underlying measures around 3.5 per cent.
For a standard 25-year, $200,000 mortgage, today's rise will increase repayments by about $34 a month. Those on a $300,000 mortgage over the same period face an extra $57 in repayments.
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