Interest rates go up 0.25%
The Reserve Bank of Australia (RBA) has bumped up its cash rate by 25 basis points to 4.25%. According to analysts the decision to do so was not cut and dried with the economy beginning to see the effects of the end of the government stimulus packages.
In practical terms, the interest rate rise will add about $45 to the cost of an average 25 year, $300,000 mortgage, however at least three of the big four banks were expected to pass on more than the .25% official rise.
Speaking today, RBA governor Glenn Stevens said that world GDP was growing close to trend this year, driven largely by the surging economies of Asia, while developed countries in the Western world continued to suffer from the legacy of the global financial crisis.
In many countries, however, the recovery was such that governments had started to wind back stimulus packages.
Continuing to look globally, Mr Stevens said that international financial markets were beginning to behave more normally and sovereign debt issues, particularly in Europe were being ‘contained’.
Locally the RBA said Australia’s terms of trade were improving, production was up and unemployment had peaked well below expectations, presenting a similar message to the justification for previous rates rises.
Mr Stevens also said that inflation was a downward trend from its 2008 peak.
”CPI inflation has risen somewhat recently as temporary factors that had been holding it to quite low rates are now abating,” Mr Stevens said.
”Inflation is expected to be consistent with the target in 2010.”
The RBA did acknowledge that lenders generally raise their interest rates by more than that of the RBA, noticeably something NAB said it wouldn’t do this time around, however Mr Stevens said that they were still paying below the long term average interest rates.
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