Reserve Bank of Australia raises interest rates by 25 basis points to 4pc

THE Reserve Bank delivered Australian homeowners an interest rate rise today, in a bid to ensure stability in the economy's powerful recovery.

The official cash rate has been raised by 25 basis points to 4 per cent for March, in a move which will add more than $200 a month to the repayments on an average mortgage.

The decision was widely expected by economists and the financial markets which had judged it a 66 per cent likelihood that the board of the RBA would vote to raise rates.

The prospect of a hike strengthened today after retail sales grew strongly in January, easing concerns that consumer demand had been flattened by three consecutive interest rate increases in late 2009.

Retail sales rose a higher-than-expected 1.2 per cent to $20.14 billion in January from $19.91 billion in December.

The March interest rate rise followed the RBA’s surprise decision in February to keep interest rates on hold. In the last three months of last year, the RBA raised rates three times. link

Scott Murdoch The Australian March 02, 2010 2:23PM