AFP: Australian central bank hikes interest rate — Australia’s central bank raised its key interest rate by 25 basis points Tuesday to a fresh 12-year high of 7.25 percent in a bid to curb inflation amid robust economic growth.. Seriously, probably because I did engineering at university (instead of commerce or economics), I still cannot work out how monetary policy pilots the economy. You see, rising interest rate should hopefully make “credit” more expensive to get, thus it should hopefully reduces the disposable income of an average family (big mortgage, heavily debited on credit card), thus it should hopefully cool down the market and reduce inflation.

Obviously, the assumption is that the big spending are on credit. Maybe it is true, but everywhere I go there are always big spenders that are not on any debt (young renters, people who have paid off their mortgage, etc). Anyway. While the latest interest rate rise might be a double blow that puts lots of pressure on struggle families, at least it is a great news for those who saves (especially when ASX is not doing too well either).

One of my favourite section on OzBargain is the Financial Category, where “bargain hunters” all share the latest and best saving schemes (Kevin, we hear ya!) Note — these are not those “make fast money on the Intraweb” schemes but mostly saving accounts offered by various financial institutions in Australia, fine prints checked by OzBargain members!

For example,

• RaboPlus — 7.30% Online Saving Account. One of the highest rate saving account with a nice web interface + “Digipass” their authentication device.

• BankWest — 7.75% Online Saving Account (honeymoon rate for 1 year, 7.25% afterwards). Best rate if you are not yet a BankWest customer. Their online banking interface has got a bit better (although I was having heaps of trouble 2 years ago).

• Members Equity — 7.50% Online Saving Account. Probably the best non-honeymoon rate although I have no experience with them. Definitely a bank to look out for.

Many online savers are also offering term deposit at around 8-8.15% for 6 month, but lower for 12 months. Maybe the interest rate is predicted to drop within a year?