©Reuters. FILE PHOTO: A worker pushing a trolley walks with pedestrians outside the Reserve Bank of Australia (RBA) headquarters in central Sydney, Australia, March 7, 2017. REUTERS/David Gray/File Photo
SYDNEY (Reuters) – Australia’s central bank kept interest rates unchanged on Tuesday, as expected, but warned a further increase could not be ruled out as inflation was still too high and needed further evidence of easing. price pressures.
Concluding its February policy meeting, the Reserve Bank of Australia (RBA) held rates at 4.35%, a 12-year high, after last raising them by a quarter of a point in November.
Markets had placed big bets on a stable outcome as inflation eased more than expected in the fourth quarter and suspected rates peaked.
The slight possibility of another rate hike, however, pushed the Australian dollar up 0.3% to $0.6504, while three-year bond futures fell 5 ticks to 96.3.
“Although recent data suggests that inflation is easing, it remains elevated… The Board must be confident that inflation is moving sustainably towards the target range,” the RBA Board said in a Note.
“The interest rate path that will best ensure that inflation returns to the target level within a reasonable time frame will depend on the data and the evolution of risk assessments, and a further increase in interest rates cannot be ruled out.”
The RBA has raised interest rates by 425 basis points from May 2022 to tame stubbornly high inflation. While inflation fell to a two-year low of 4.1% in the fourth quarter and moved away from its peak of 7.8% in late 2022, it is still well above the target range of 2- 3% of the central bank.
However, the economy slowed, the red-hot job market began to ease and consumer spending remained weak amid cost-of-living pressures and high mortgage rates.
Relieving the upward pressure is the dramatic change in the foreign monetary policy outlook since the RBA last met in early December. Markets are currently pricing in total easing of 114 basis points and 123 basis points by the Federal Reserve and the European Central Bank respectively this year.
However, most economists do not expect any rate easing from the RBA until September.