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Australian central bank hikes interest rates again

AUSTRALIA’S central bank raised its cash rate by 25 basis points to four per cent yesterday and flagged further hikes ahead, saying a surprisingly strong recovery allowed it to move policy toward more normal settings.

Reserve Bank of Australia (RBA) governor Glenn Stevens said: “With growth likely to be close to trend and inflation close to target over the coming year, it is appropriate for interest rates to be closer to average.”

“It is very likely the RBA will hike again in the next three months,” said Rory Robertson, interest rate strategist at Macquarie Bank.

This was the fourth increase in five policy meetings, putting Australia far ahead of most other G10 nations where rates are at one per cent or, in many cases, even less.

Reaction in the currency market was restrained as the Australian dollar had already risen sharply in recent days, hitting a record high on the euro and a 25-year peak on sterling.