Australia hikes rates to 7.00-pct, a 12-year-high

SYDNEY, Feb 5, 2008 (AFP) – Australia’s central bank Tuesday lifted its key interest rates 25 basis points to 7.00 percent from 6.75 percent — a 12 year high — as it struggles to fight inflationary pressures. Reserve Bank of Australia (RBA) governor Glenn Stevens said recent information pointed to “significant inflation pressures”.

“CPI (Consumer Price Index) inflation on a year-ended basis picked up to 3.0 percent in the December quarter, with underlying measures around 3.5 percent,” he said.

“This was a little higher than was expected a few months ago.”

Stevens said demand remained strong through the second half of 2007 while reports of high capacity usage and shortages of suitable labour persisted. “In the short term, inflation is likely to remain relatively high and will probably rise further in year-ended terms, though the Bank expects it to moderate somewhat next year,” he said.