CANBERRA, Aug. 2 (Xinhua) -- The Australian central bank on Wednesday increased interest rate by 0.25 percentage point to a six-year high of 6.0 percent.

    The Reserve Bank of Australia (RBA) hiked interest rate in an effort to head off inflationary pressures in a booming economy. It was the bank's second interest rate hike since May, when the interest rate was lifted by a quarter of percentage point.

    "The decision reflects the board's assessment that economic activity remains strong and that inflation pressures have increased," RBA governor Ian Macfarlane said in a statement.

    Record high oil prices and a sharp increase in fruit prices following a cyclone in Queensland state earlier this year have put inflation to 4.0 percent last month, high above the bank's target range of 2.0-3.0 points.

    Given this circumstances, the board judged that an increase in the cash rate was warranted in order to contain inflation in the medium term, Macfarlane said.

    Raising rates increases the cost of borrowing and quells pressures of inflation, as well as the cost of businesses and consumers, who have to pay more to borrow and to service debt.

    Commonwealth Bank economist Craig James hoped the rate rise would be the last in the current cycle although warranted.

    Twenty-five basis points would clearly hurt families and would clearly slow down the economy, he added. Enditem