 RBA lifts rates
The Reserve Bank of Australia has lifted official rates by 25 basis points to 3.50 per cent.
The move comes as the Reserve Bank met for it's monthly policy meeting and is the second rise in five weeks after the RBA raised rates from 3% in October.
The central bank was concerned that the historically low rates would cause inflation to overheat.
Within minutes, the ANZ Bank announced a 25 basis point increase to standard variable mortgage rates. A 25 basis point increase to the official rate means an additional $46 a month in repayments on a $300,000 home loan, according to comparison website Canstar Cannex.
Senior economists at the National Australia Bank say the Reserve Bank has shifted focus from the economic crisis to staving off inflation.
Last year the RBA moved to slash rates as the global financial crisis took it's toll on the Australian economy but now as world economies recover, the central bank is looking to control inflation.
The minutes of the RBA's October meeting showed board members were concerned that underlying inflation was still above the central bank's two to three per cent target range.
RBC captial markets senior economist says the RBA will keep increasing official rate steadily until the "neutral setting" of 5 or 6 per cent is reached. Su-Lin Ong predicts the upward cycle will last until late 2010.
Reserve Bank govenor Glenn Stevens says now is the time to lift rates as the risk of a serious contraction in the Australian economy had passed.
ANZ has increased mortgage rates already, and the other major banks - Commonwealth, National Australia Bank and Westpac- say their mortgage rates are under review.
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