Australia first advanced economy to lift rates since crisis
AFP/ PTI / Sydney Oct 06, 2009, 15:32 IST
Australia today became the first advanced economy to raise interest rates since the global financial crisis and promised more rises to come, declaring the risk of recession over.
The central bank announced a rise of 25 basis points to 3.25 per cent, lifting rates off a 49-year low after an aggressive round of cuts credited with helping fight off the worst global downturn since the Great Depression.
"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," Reserve Bank of Australia (RBA) governor Glenn Stevens said in a statement.
However, some experts were stunned by the rate rise, saying they expected a more cautious approach during a fragile world recovery.
The Australian Chamber of Commerce and Industry (ACCI) said the RBA had acted "too hastily" and warned the move would dampen rising consumer and business confidence.
The Australian dollar surged to 88.8 US cents as investors rushed to cash in on the higher rate. Gains on the Sydney share index were limited to 0.4 per cent over worries that the rise would hit mortgage-holders in the pocket.
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