The Reserve Bank lifted interest rates by 0.25% to 4.25% and signalled that there’s more in store.

Despite signs of soft demand in February, the central bank lifted rates for a second successive month, to make five increases in total since it started tightening monetary policy from the emergency level of 3% late last year.

“With the risk of serious economic contraction in Australia having passed some time ago, the Board has been lessening the degree of monetary stimulus that was put in place when the outlook appeared to be much weaker. Lenders have generally raised rates a little more than the cash rate,” Governor Glenn Stevens said in the usual post-meeting statement this afternoon.

Some economists had thought the central bank might not lift rates because of the weaker than expected retail sales and building approvals for February.

But house prices, especially in more expensive suburbs, continue to rise and Governor Stevens last week went out of his way to warn people against thinking there were easy gains to be made by investing in property.

“Interest rates to most borrowers nonetheless have been somewhat lower than average,” he said in today’s statement.

“Australia’s terms of trade are rising, adding to incomes and fostering a build-up in investment in the resources sector.

“Under these conditions, output growth over the year ahead is likely to exceed that seen last year, even though the effects of earlier expansionary policy measures will be diminishing.”

“The Board judges that with growth likely to be around trend and inflation close to target over the coming year, it is appropriate for interest rates to be closer to average.

“Today’s decision is a further step in that process.”