Interest rates at near 12-year highs

Feb 5,

Australia - THE central bank has raised official interest rates, as expected, following its board meeting today and signalled there may be further increases to come.

The Reserve Bank of Australia (RBA) hiked the cash rate to 7 per cent, from 6.75 per cent, in a bid to temper inflationary pressures in the economy.

Prime Minister Kevin Rudd has said that this rise will "really hurt" household budgets, blaming pressure on inflation inherited from the last government. Shadow Treasurer Malcolm Turnbull has said Mr Rudd and Treasurer Wayne Swan's loose lips on inflation were part of the problem.

The rise was widely expected with 17 out of 19 economists surveyed by AAP last week forecasting a quarter of a percentage point lift.

The cash rate is now at its highest level since November 1996.

"In future meetings, the board will continue to evaluate whether the stance of policy will be sufficiently restrictive to return inflation to the two to three per cent target," RBA governor Glenn Stevens said.

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