Australian Central Bank Holds Rate, Inflation Concerns Linger
(RTTNews) - The Reserve Bank of Australia left its benchmark interest rate unchanged on Tuesday and signaled rate hike if upside risks to inflation materialize.
At the two-day rate setting meeting, the policy board, governed by Michele Bullock, unanimously decided to hold the cash rate target at 4.35 percent.
Markets widely anticipated the bank to hold the policy rate after inflation slowed more than expected on lower fuel prices.
The bank had lifted the policy rate by 25 basis points each in February, March and May.
The board pointed out that it remains focused on ensuring that high inflation does not become embedded. To achieve this, growth in aggregate demand needs to remain subdued to reduce capacity pressures and bring inflation back to target.
With three rate hikes since the beginning of the year, financial conditions are now tighter than they were, and the economy appears to be slowing as expected, the bank said.
The board observed that inflation is not expected to return to around the midpoint of the target range until late 2027 and there are upside risks to this projection.
"With monetary policy judged to be somewhat restrictive, the Board decided to leave the cash rate target unchanged while it assesses how the economy is evolving," the bank said in a statement.
"The Board will continue to do what it considers necessary to bring inflation sustainably back to target, including increasing the cash rate target further if upside risks materialize," the bank added.
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