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Australian rates at 10-year high | Australian rates at 10-year high |
(about 5 hours later) | |
Australian interest rates are at their highest level for more than 10 years after the country's central bank raised them by a quarter-point to 6.5%. | |
The expected move was the first jump in the cost of borrowing since November. | The expected move was the first jump in the cost of borrowing since November. |
The Reserve Bank of Australia said this would help to keep the annual inflation rate from rising above 3%, the top end of the government's target range. | The Reserve Bank of Australia said this would help to keep the annual inflation rate from rising above 3%, the top end of the government's target range. |
A buoyant economy has put pressure on prices and led to record consumer debt levels, but unemployment remains low. | A buoyant economy has put pressure on prices and led to record consumer debt levels, but unemployment remains low. |
Mortgage pressure | Mortgage pressure |
Annual inflation rose to 2.75% in the second quarter of the year and analysts say there is little spare capacity in the economy with unemployment near a 30-year low. | Annual inflation rose to 2.75% in the second quarter of the year and analysts say there is little spare capacity in the economy with unemployment near a 30-year low. |
There's every chance we will get another rate hike or two next year Warren Hogan, ANZ | There's every chance we will get another rate hike or two next year Warren Hogan, ANZ |
"Based on these considerations, the board judged that a somewhat more restrictive monetary policy setting was required in order to keep inflation consistent with the target in the medium term," the bank commented. | "Based on these considerations, the board judged that a somewhat more restrictive monetary policy setting was required in order to keep inflation consistent with the target in the medium term," the bank commented. |
Analysts said further rises could not be ruled out given that economic growth forecasts remained strong. | Analysts said further rises could not be ruled out given that economic growth forecasts remained strong. |
"It does not mean the rate tightening cycle is finished by any stretch," said Warren Hogan, head of market economics at ANZ bank. | "It does not mean the rate tightening cycle is finished by any stretch," said Warren Hogan, head of market economics at ANZ bank. |
"There's every chance we will get another rate hike or two next year." | "There's every chance we will get another rate hike or two next year." |
The last time rates were as high as 6.5% was at the end of 1996. | The last time rates were as high as 6.5% was at the end of 1996. |
Election calculation | Election calculation |
Rising borrowing costs are problematic for Prime Minister John Howard who is seeking re-election later this year. | Rising borrowing costs are problematic for Prime Minister John Howard who is seeking re-election later this year. |
Responding to the bank's decision, Mr Howard acknowledged that many homeowners would be hurt by the move. | Responding to the bank's decision, Mr Howard acknowledged that many homeowners would be hurt by the move. |
But he said tax cuts announced by his government earlier this year would help ease the burden on household finances. | But he said tax cuts announced by his government earlier this year would help ease the burden on household finances. |
Interest rates have been rising in most leading industrialised countries as policymakers try to contain inflationary pressures. | Interest rates have been rising in most leading industrialised countries as policymakers try to contain inflationary pressures. |
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