The Reserve Bank of Australia announced a move which was highly unexpected from the bank under which it said it will be increase its benchmark interest rate. It is to be mentioned here that the bank said that the rate rise is on the back of the on concern of stronger growth that will cause inflation to accelerate.

Moreover, the bank also said that the rise will be driving the nation's currency toward parity with the U. S. Dollar. Governor Glenn Stevens and his board announced an overnight rise in the cash rate target by a quarter to a level of close to 4.75% in Sydney. It may be noted here that the rate rise in the first in the last six months. However, it is now expected that the Australian economy is now subject to a large expansionary shock and relatively modest amount of the spare capacity. Matthew Circosta, an economist at Moody's Analytics in Sydney, said it is like trying to nip inflation in the bud.

Moreover, the economist also said that the government made a mistake in 2007 and it is unexpected that they will like to repeat it this time onwards.