CANBERRA, Australia — Australia’s central bank left its benchmark interest rate on hold at 3.6% on Tuesday following evidence that inflation is falling.
It was the first monthly meeting at which the Reserve Bank of Australia board did not hike the cash rate since April 6 last year.
Australia's annual inflation appears to have peaked in December at 8.4%, falling to 7.4% in January and 6.8% in February. The bank manipulates rates to keep inflation within a target band of between 2% and 3%.
Bank Governor Philip Lowe said his board had halted the rise in interest rates to observe the full impact of the rate hike of 3.5 percentage points since May last year.
“The board recognizes that monetary policy operates with a lag and that the full effect of this substantial increase in interest rates is yet to be felt,” Lowe said in a statement. “The board took the decision to hold interest rates steady this month to provide additional time to assess the impact of the increase in interest rates to date and the economic outlook."
There is growing evidence that the combination of higher interest rates, cost-of-living pressures and a decline in housing prices was leading to a substantial slowing in household spending, Lowe said.
“The board expects that some further tightening of monetary policy may well be needed to ensure that inflation returns to target,” Lowe said.
Finance Minister Katy Gallagher said the bank’s decision to leave the rate unchanged would come as welcome news to many Australian households and businesses.
“Today’s decision follows early signs that inflation has likely passed its peak and is beginning to moderate,” Gallagher told reporters.
“But we know that it will remain higher than we like for longer than we like and that’s why addressing inflation was a key priority in the October budget, it remains a key priority as we finalize decisions in the budget that will be handed down in May,” Gallagher added.
The government will release its annual budget on May 9.
“Fundamentally we acknowledge that inflation’s the key challenge in the economy and getting that back to the target range is a priority,” she said. “So the decisions we take and decisions that we’re in the midst of right now, we’re absolutely focused on not making the inflation problems worse.”
Opposition treasury spokesman Angus Taylor urged the government not increase taxes due to cost of living pressures on the public from high inflation and interest rates.
Sourse: abcnews.go.com
