SYDNEY (Reuters) – The Reserve Bank of Australia kept interest rates steady on Tuesday, saying it wanted more time to assess the impact of past rate hikes, but reiterated its warning that further tightening Policies may need to control inflation.
Reserve Bank of Australia (RBA) leaves cash rate on hold at as it wraps up its July policy meeting Year high of 4.% and interest rates raised basis points since last May, this The most aggressive tightening cycle in modern history to curb inflation.
Markets have been leaning toward a pause, but economists are divided on the outcome, according to a Reuters poll of 16, there are expected to raise interest rates, and the rest are expected to hold the bank. [AU/ INT].[AU/INT]
Australian dollar fell 0.4% to $0.2025, but has since recovered all losses to trade at $0.6682 as traders expect at least one more rate hike in the current cycle. Markets have now shifted to hint about 25-25 chances of rising to 4. 35% August, while risking a further rise to 4.6%
In a policy statement on Tuesday, RBA Governor Philip Lowe said higher interest rates are working to create a more sustainable balance between supply and demand in the economy.
“Given this and the uncertainty surrounding the economic outlook, the board has decided to hold interest rates steady this month.”
RBA Governor noted uncertainty about the economic outlook .The outlook for household consumption and the global economy.
Lowe, however, reiterated previous warnings that further tightening of monetary policy may be needed as “inflation remains too high and will persist for some time”.
“Today’s decision to pause rate hikes shows that the RBA recognizes that the economy is on a knife’s edge and must reorient itself to achieve its objective of navigating a ‘narrow path’ under current economic conditions,” Deloitte Economics partner Stephen Smith said.
The RBA surprised markets by pausing rate hikes for the first time in April and then resuming hikes in May and June, a hawkish bias that led to Many economists believe a recession is more likely this year given the lackluster growth.
Economic data has been mixed over the past month. Volatile monthly inflation data cooled sharply, requiring Paused, but blockbuster jobs report and strong retail sales suggest the RBA has some work to do.
The continued rise in house prices, improving housing finance and a strong rebound in building approvals suggest financial Conditions may not be as tense as expected.
August rate hike?
Indeed, following the release of Q2 inflation data in late July, many economists see an August rate hike as a strong possibility, which may indicate that inflation remains sticky.
“As the labor market remains very tight, house prices have rebounded strongly and unit labor costs have soared, another 25 bp rate hike Capital Investment Marcel Thieliant, senior economist at Capital Economics, said: “Inflation in August still seems likely and we doubt the central bank will introduce another inflation in September. “
The central bank now forecasts that headline inflation – at 7% this first quarter – will return to the top of the 2-3% target range over the medium term 2025.
Global policymakers are still grappling with relatively high inflation despite aggressive rate hikes for more than a year. A quarter-point rate hike is certain this month, which could weigh on an already weak Aussie.
Low will also decide this month whether he will be re-elected. Governor is a veteran of four years in the bank, and since stated several times in 400 that interest rates will not rise until 2022, Only to reverse course and hike rates when inflation unexpectedly spikes mid-year 400.