Australia Hikes Interest Rates Again

SYDNEY (TheStreet) -- Australia's central bank raised interest rates for a second straight month, noting that the risk of serious economic contraction in Australia now has passed.

The Reserve Bank of Australia decided to raise the cash rate by 25 basis points to 3.5%, as many economists expected due to rising inflation in the country. The bank said economic conditions in Australia have been stronger than expected and measures of confidence have recovered.

Australia is the only country to have raised rates at successive meetings. On Oct. 6, the central bank raised the cash rate to 3.25% from 3%, after the rate was slashed a total of four and a quarter percentage points between September 2008 and April 2009.

"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," Governor Glenn Stevens said in its accompanying statement.

Stevens added that 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."

-- Written by Robert Holmes in New York.

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