Australia's central bank raised its key interest rate by 25 basis points to a fresh 12-year high of 7.25% in a bid to curb inflation amid robust economic growth.
The Reserve Bank of Australia's move had been widely expected and increases pressure on the new LaboUr government of Prime Minister Kevin Rudd as homeowners brace for higher mortgage payments with food and fuel costs already rising.
Today's rise is the fourth 0.25 percentage points rate hike in seven months and the twelfth since May 2002 as huge Chinese raw material demand boosts resource-rich Australia's growth. Last month's hike set the earlier 12-year high.
The Australian central bank aims to keep inflation within a 2-3% range, but in the fourth quarter of 2007 the annual underlying core inflation rates were around 3.5%.
The central bank said that domestic demand was appreciably higher than the growth of the economy's productive capacity over the year, while labour market conditions remained strong into early 2008. The world economy was slowing and it appeared likely that global growth would be below trend in 2008, it noted.
