Reserve Bank announce rate rise to 3.5 per cent

Wednesday November 4, 2009

Reserve Bank of Australia has delivered on the much predicted interest rate rise today, announcing that the official interest rate will now be 3.5 per cent. This is an increase of 25 basis points and is the first two consecutive month increase performed by the Reserve Bank since March 2008, a month that recorded a massive 7.25 per cent on interest rates.

RBA Governor Glenn Stevens stated ''With the risk of serious economic contraction in Australia now having passed, the Board's view is that it is prudent to lessen gradually the degree of monetary stimulus that was put in place when the outlook appeared to be much weaker,''

''The adjustments at the October and November meetings will work to increase the sustainability of growth in economic activity and keep inflation consistent with the target over the years ahead,'' he said.

The increase to the basis points will add around $45 to a standard $300,000 mortgage with a 25 year duration.
The recent changes to the interest rates is designed to sustain growth in the Australian economy, with the major banks subsequently debating about where they will stand on rates and how quickly they too will raise them.

Recently there has been a level of discussion and rivalry between the banks after ANZ announced that it would remain even with the Reserve bank of Australia, a statement it later revised to include changes at its own discretion depending on market changes. Essentially, the major Australian banks are remaining true with the Reserve Bank but are reserving the right to act alone.

The increases to the interest rate rises by the Reserve Bank are said to be the result of Australia's strong resilience against possible recession.

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