Reserve Bank raises official cash rate by 0.25%

The Reserve Bank has lifted the official cash rate by 0.25% to 5.5%, sticking to what most economists believed was its original plan before the Government’s higher-spending Budget last week.

Unusually, however, there was no clear consensus ahead of the announcement on the size of the rate-rise after the Budget, with some economists still expecting a 25 basis point increase, some a 50bp increase, and some advising there should be no increase at all.

Economists and politicians will be looking closely for clues in the Reserve Bank’s statement and at a press conference at 3pm on the degree to which the bank thinks the Government’s announcement of $5 billion of fresh spending in the Budget could keep interest rates higher for longer.

More to come