Reserve Bank hikes official cash rate to 4.5%

The Reserve Bank of Australia (RBA) has increased its official cash rate for the third time in a row.

At its rate meeting today (May 4th), the RBA made another 25 basis point increase, which puts the official cash rate at 4.5 per cent.

Announcing the hike, Reserve Bank governor Glenn Stevens said rates were now back at "average levels".

"With the risk of serious economic contraction in Australia having passed some time ago, the Board has been adjusting the cash rate towards levels that would be consistent with interest rates to borrowers being close to the average experience over the past decade or more," he added.

Mr Stevens argued that while rising interest rates have led to a fall in new home loan approvals in recent months, "the market for established dwellings is still characterised by considerable buoyancy" as property prices continue to increase.

Last week, Loan Market reported that its home loan approvals to first home buyers were down 40 per cent during the first three months of 2010.

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