Retail bodies the Australian Retailers Association (ARA) and the National Retailers Association have expressed their disappointment at the Reserve Bank's decision to raise interest rates by 25 basis points to 3.25 per cent.

 Despite positive economic signs, both groups had urged the Government to leave interest rates at the previous three per cent, arguing that despite a return in consumer confidence, retail sales remained inconsistent.

 ARA executive director Russell Zimmerman said the rate rise could have a damaging effect on Christmas retail trade.

"Retailers would've liked to have seen a few more months of solid trade growth before any interest rate rises and they will definitely not welcome any interest rate hikes in the lead up to Christmas.

"Usually changes to interest rate take between three to six months to impact the retail market. So, the damage could hit retailers just in time for Christmas.

"Clothing and footwear retailers, as well as restaurants, cafes and take-aways are expected to be hit the hardest by this premature interest rate rise. These are areas were consumers traditionally tighten their spending if they are feeling financial pressure," Zimmerman said.