RBA increases interest rate by 0.25%

The level has risen for the first time since May.

The Reserve Bank of Australia (RBA) has upped the interest rate by 0.25 per cent for the first time since May.

The cash level now stands at 4.75 per cent after the hike, which will become effective on November 3rd.

Announcing the change following the group’s monetary policy decision meeting, governor of the RBA Glenn Stevens told Australians the turmoil experienced earlier this year has subsided, but sentiment is still fragile.

He added: “The prices most important to Australia remain at very high levels, with the result that the terms of trade are at their highest since the early 1950s.”

Moreover, Mr Stevens noted overall Aussie credit growth is quite subdued, while asset values are not moving in either direction.

This comes after the Commonwealth Bank (CBA) announced last month – in its Business Sales Indicator, which tracks the level of debit and credit card spend at its point-of-sale terminals – that there were gains of 0.2 per cent.

In addition, this result was the second consecutive monthly increase after eight months of declines.

Following the RBA’s announcement, the CBA stated it is upping the levels on its variable home loan accounts by 0.45 per cent.

What’s more, in the RBA meeting, Mr Stevens also revealed that interest rates to borrowers had been close to their average over the past decade.

He pointed out: “This allowed some time to observe the early effects of previous policy changes and to monitor the uncertain global outlook. The board is also cognisant of differences in the degree of economic strength by industry and by region.”

And he stated there is still a threat of inflation rising once again over the medium term, so the group decided that the balance of risks had moved to suggest that an early, modest tightening of monetary policy was a sensible option.

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