SYDNEY - AUSTRALIA'S central bank raised its key interest rate on Tuesday by a quarter percentage point for the second month in a row, declaring the global downturn over and warning that inflation was set to rise.
The decision was widely expected by analysts and underlines Australia's quick recovery compared with other developed countries. Most have yet to respond to signs the global economic crisis has eased by raising borrowing costs.
The Reserve Bank of Australia board decided at its monthly meeting to raise the cash rate a quarter point to 3.5 per cent. A month earlier, Australia became the first major economy to raise interest rates since the outbreak of the financial crisis when the bank hiked its key rate by a quarter point from a 50-year low.
'The global economy has resumed growth,' Gov Glenn Stevens said in a statement explaining the decision. Inflation will probably rise 'somewhat' over the coming year, he said.
'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 in place when the outlook appeared to be much weaker,' Mr Stevens said.
Australia has been a rarity among developed economies by avoiding recession during the worst global economic slump since World War II. It survived the downturn better than most thanks to A$42 billion (S$53 billion) of government stimulus spending and strong demand from China and other Asian nations for its iron ore and other mineral resources. -- AP
