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RBA Lifts Rates For Second Time In 2010
On Tuesday, the Australian central bank, the Reserve Bank of Australia delivered its second interest rate hike in 2010 and warned Australians that further rate hikes were likely as the economic recovery gains momentum following the global financial crisis.
The decision to lift interest rates by 25 basis points for the second time this year, from 4 to 4.25 per cent means the RBA is one of the few central banks across the developed world to actively begin tightening monetary policy.
The increase in lending rates will add about $50 a month to the average $300,000 mortgage in Australia.
CBA was the first big four lender to respond to the rate hike, lifting its key lending rates on Tuesday afternoon shortly after the central bank’s announcement.
CBA said it would increase its standard variable rate by 25 basis points, whilst also raising deposit rates on selected savings accounts also by 25 basis points.
On Monday, Australia’s fourth largest lender NAB vowed it would not lift rates by more than the central bank.
RBA governor Glenn Stevens in his statement accompanying the decision said the world economy was experiencing growth, and was widely expected to expand at close to its trend level this year and next, following two years of stagnations.
Mr. Stevens said that Australian inflation would be consistent with the central bank’s target inflation rate of 2-3 per cent in 2010.
“Interest rates to most borrowers have been somewhat lower than average, the board judges that with growth likely to be around trend and inflation close to target over the coming year it is appropriate for interest rates to be closer to average. Today’s decision is a step closer in that process.” Mr. Stevens said.
Some economists are now predicting the official cash rate will rise to between 5 to 5.5 per cent by the end of year, with financial markets predicting a 60 per cent chance that the RBA would raise rates on Tuesday, down from 80 per cent in the previous week, following soft retail sales data.
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