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Concerns about inflation and recognition that Australia's economy was improving faster than other developed nations prompted the Reserve Bank of Australia to raise interest rates earlier this month.
Minutes of the October 6 monetary policy meeting were released Tuesday. At the meeting, board members voted to increase interest rates by 25 basis points to 3.25 percent.
They showed that the RBA saw a danger in keeping rates too low for too long, specifically in the form of inflation, saying "the risk of waiting" had increased.
"Overall, the information becoming available over the past month had provided further evidence that the outlook for the domestic and global economies was continuing to improve," the minutes said.
Moments after release of the minutes, the Australian dollar jumped above 93 cents to the US dollar, reaching its highest level since August 2008.
RBA board members noted that underlying inflation was still above the central bank's 2 to 3 per cent target range.
While it was forecast to fall ''the expected trough in inflation was significantly higher than earlier thought''.
''Keeping interest rates at very low levels for an extended period could therefore threaten the achievement of the inflation target over the medium term,'' the minutes added.
''More generally, very expansionary policy could result in the build-up of other imbalances in the economy, which would ultimately be detrimental to economic growth.''Inflation ''could be rising again'' by 2011, the minutes said.
Board members noted that domestic economic conditions had been "noticeably stronger than had earlier been predicted," and that most forecasts for economic growth had been upwardly revised.
The board noted that a "sizable gap" had opened between Australia's economic performance and that of other developed economies.
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