RBA raises interest rate by 25 basis points

The Reserve Bank of Australia (RBA) has announced that it is to increase the national interest rate by 25 basis points.

Effective from October 7th, the cash rate will be 3.25 per cent, which may be good news for those with high interest savings.

This represents the first major economy in the world that has resolved to raise rates since the recession began.

In a statement, Glenn Stevens, governor of the monetary policy committee, explained the decision.

He said it was a result of economic conditions in Australia being "stronger than expected", combined with a boost in confidence.

In addition, unemployment has not risen as far as previously anticipated and home loan growth has been "solid", with an increase in property values.

Mr Stevens remarked that the impact on people with mortgages should be minor.

"Interest rates facing prospective borrowers on fixed-rate loans have already risen to some extent, as markets have anticipated a higher level of the cash rate," he noted.

The development may come as a surprise to some people, as many commentators predicted the RBA would stick at three per cent.

In fact, an AAP poll found that 14 out of 16 finance experts believed the interest rate would hold this month.

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