Australia Keeps Key Rate Unchanged For Second Time

In an unexpected move, Australia’s central bank left its benchmark interest rate unchanged for the second straight meeting, in order to assess the impact of the past tightening on the economic activity.

The policy board of the Reserve Bank of Australia, led by Governor Philip Lowe, decided to hold the cash rate target unchanged at 4.10 percent. The bank was widely expected to hike the rate by a quarter point.

The interest rate paid on exchange settlement balances was also kept unchanged at 4.00 percent.

The RBA has raised its benchmark rate by 400 basis points since May last year. The board noted that the higher interest rates are working to establish a more sustainable balance between supply and demand in the economy and will continue to do so.

“In light of this and the uncertainty surrounding the economic outlook, the Board again decided to hold interest rates steady this month,” Lowe said.

The decision to pause the rate hike will provide further time to assess the impact of the increase in interest rates to date and the economic outlook, the governor added.

Lowe said some further monetary policy tightening may be required to ensure that inflation returns to target in a reasonable timeframe, but that will depend upon the data and the evolving assessment of risks.

The RBA forecast inflation to continue to ease, to around 3.25 percent by the end of 2024 and to be back within the target range of 2-3 percent in late 2025.

Barring any new inflationary shocks, there is a good chance the central bank is done tightening altogether, Capital Economics’ economist Abhijit Surya said. Looking ahead, an easing cycle will not come into play for a while, the economist added.

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