SYDNEY (Reuters) – Australia’s central bank left its key rate unchanged on Tuesday to take time to assess the impact of its monetary tightening for more than a year.
The institution, however, warned that additional rate hikes may be necessary to bring prices down.
The monetary policy committee of the central bank (RBA, Reserve Bank of Australia) kept the key interest rate at 4.10%, its highest level in 11 years, after having raised it by 400 basis points since last May.
Of the 31 economists polled by Reuters, 16 expected a rate hike and the other 15 expected the status quo. On the foreign exchange market, the Australian dollar lost 0.28% against the Australian dollar.
The RBA governor said in a statement that higher interest rates help establish a more sustainable balance between supply and demand in the economy.
“Given this and the uncertainty surrounding the economic outlook, the Board of Directors has decided to keep interest rates unchanged this month,” added Philip Lowe.
He warned, however, that monetary tightening could resume as inflation threatens to remain too high for some time.
Many economists believe there is a good chance of another hike in August following the release of second-quarter inflation figures in late July, which could show price developments remaining stable.
“With the labor market still very tight, house prices and unit labor costs rising, another rate hike of 25 basis points in August is still possible,” said economist Marcel Thieliant. senior at Capital Economics.
(Stella Qiu and Wayne Cole, Laetitia Volga, editing by Kate Entringer)
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