Major banks first to respond to rate rise

The Reserve Bank has lifted the official cash rate 0.25 percentage points to 4.5 per cent, citing concerns about inflation and house prices in a strongly performing economy. Major home lenders have started adjusting their rates in the wake of the RBA increase, the first rise in official interest rates in almost two years. The National Australia Bank was the first major lender to announce that the rate rise will be passed on in its variable home loan rates. It was followed by the Commonwealth Bank, Australia's biggest home lender, and then Westpac. The ANZ said that it is still reviewing its rates.

The Reserve Bank stated that the local economy is growing much more strongly than other advanced economies. Although it sees a moderate decline in inflation in some areas, it is worried that persisting with expansionary policy settings would amplify inflation pressures and create other imbalances, such as the current overheating in the housing market.