Sydney, May 3 :

Australia’s central bank said on Wednesday it lifted a key interest rate by a quarter point to 5.75 per cent, the first increase in 14 months, to head off inflation. The move boosted the Australian dollar.

The Reserve Bank issued a statement saying its board had decided at its monthly meeting Tuesday that it would lift the official cash rate to its highest since February 2001. It was the first hike since a quarter point increase in March 2005.

Speculation about a rate rise grew last week after government figures revealed that consumer price inflation had reached 3 per cent - the top of a 2-3 per cent band in which the bank aims to keep inflation.

In a statement, Reserve Bank Governor Ian Macfarlane said the bank acted amid recent signs that inflation was accelerating. He said the underlying consumer price index in the first quarter had reached 2.75 per cent, a rate it hadn’t been expected to reach until the second half of the year. “These domestic and international trends have added to inflationary pressures in an economy that has been operating for some time with rather limited spare capacity and low unemployment,” Macfarlane said.

Traders bid up the Australian dollar, which climbed to US$0.7675 by early afternoon, up 0.7 per cent from its close in New York of US$0.7620.