RBA Raises Key Rate To 3.25%

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Tuesday, the Reserve Bank of Australia raised its interest rate to 3.25% from a 49-year low of 3%. Economists had expected the central bank to retain the key rate at 3.00%. Previously, rates had been retained at an ultra-low setting of 3% since April 2009.

RBA Governor, Glenn Stevens said, "In late 2008 and early 2009, the cash rate was lowered quickly, to a very low level, in expectation of very weak economic conditions. That basis for such a low interest rate setting has now passed, however. With growth likely to be close to trend over the year ahead, inflation close to target and the risk of serious economic contraction in Australia now having passed, the Board's view is that it is now prudent to begin gradually lessening the stimulus provided by monetary policy."

He noted that economic conditions in Australia were stronger than expected and that confidence had recovered. Higher dwelling activity and public infrastructure spending will also give support to spending. As such, growth is likely to be firm going into 2010, Stevens said.

Tuesday, the Reserve Bank of Australia raised its interest rate to 3.25% from a 49-year low of 3%. Economists had expected the central bank to retain the key rate at 3.00%. Previously, rates had been retained at an ultra-low setting of 3% since April 2009. (Market News Provided by RTTNews)