The Board therefore concluded that the balance of risks had shifted to the point where a move to a slightly restrictive stance of monetary policy was prudent, and it decided to lift the cash rate by 25 basis points to 4.75 per cent.
Banks responded to the November increase in the cash rate with substantially larger increases – around 40 basis points – in interest rates on housing loans. The size of this increase, and the controversy it created, seemed to have a noticeable impact on household behaviour. Consumer confidence fell, though to levels that were still above average.