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Australia Increases Benchmark Rate to 12-Year High Australia's central bank increased its benchmark interest rate for the second time in four weeks and said there are signs the highest borrowing costs in 12 years are prompting consumers and companies to temper spending. Governor Glenn Stevens and his board raised the overnight cash rate target by a quarter point to 7.25 percent in Sydney today to stem the fastest inflation since 1991. Stevens said rates have risen ``substantially'' since mid-2007. The nation's currency dropped and bonds rose as investors bet the central bank may not raise rates again in the next 12 months. The 1 percentage point increase in the benchmark since August contrasts with the U.S., Canada and the U.K., which have cut rates to cushion their economies from slower global growth and credit-market turmoil. ``The Reserve Bank thinks for the time being it has done enough and will sit back to see how things unfold,'' said Shane Oliver, chief economist at AMP Capital Investors in Sydney. While the bank still ``has a tightening basis,'' today's statement ``seems a bit more balanced than previous statements,'' he said. Australia's dollar fell to 93.14 U.S. cents at 6:40 p.m. in Sydney from 93.77 cents immediately before the decision, which was forecast by all 27 economists surveyed by Bloomberg News. The yield on the two-year government bond dropped 10 basis points, or 0.1 percentage point, to 6.56 percent.