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RBA shocks market with cash rate call

The Reserve Bank of Australia has made its final interest rate decision of the year at its monthly board meeting.

The board shocked most observers by increasing the official cash rate to 2.25 per cent, after it had been at 2 per cent since May.

All 33 economists and commentators surveyed by comparison website finder.com.au had forecast that rates would remain on hold – indeed, five also forecast that a rate cut would occur at the next board meeting in February.

The RBA appears to have felt the economy was now strong enough to cope with increasing the cash rate from what had been a record-low setting.

Australia’s unemployment rate fell from 6.2 per cent to 5.9 per cent in the most recent monthly statistics.

After today’s decision, speculation will begin about what the RBA will do at its February meeting.

The board made two other movements on interest rates this year – a 0.25 per cent cut in February and another 0.25 per cent cut in May.

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