Australia's central bank unexpectedly raised interest rates by a quarter point Oct. 6, the first major economy to increase the cost of borrowing amid signs its recovery from the global slump is gaining momentum.

The Reserve Bank of Australia raised its cash rate to 3.25 percent from a 49-year low of 3 percent.

The rate hike comes after recent data showed the economy was improving. Central bank Gov. Glenn Stevens said it was "prudent" to begin gradually reducing the stimulus provided by low interest rates. He said the risk of "serious economic contraction" in Australia had passed.

Australia has weathered the worst global downturn in decades better than other industrialized nations. It avoided slipping into recession — helped by stable banks, demand from China for iron ore and other minerals, and the government's 42 billion Australian dollars ($37 billion) of stimulus spending.