Australia raises rates to 4%

by Richard Kilner

Story link: Australia raises rates to 4%

The Reserve Bank of Australia has chosen to increase interest rates by 25 basis points, to 4%.

Governor Glenn Stevens has indicated his belief that the global economy will continue growing this year and the next, but warned that growth would remain hesitant in some countries suffering the legacy of the financial crisis.

Australia was hit by only a mild economic downturn, and enjoyed a stronger than expected recovery with lower than expected unemployment.

Inflation has generally been low, although it has risen recently, and is expected to be more or less on target in 2010.

The decision by the Reserve Bank marks a return to rising rates in Australia, following February’s decision to hold rates steady and bring consecutive rises of 25 basis points to an end.

Many other major central banks, such as the ECB and Bank of England, have retained record low rates for many months to help try and provide a monetary stimulus to economies weakened by the financial crisis and ensuing global recession.