RBA leaves rates unchanged
The Reserve Bank of Australia (RBA) has held rates at 4.1 per cent.
Since May last year, rates has risen by 4 percentage points.
Governor Philip Lowe said: “The higher interest rates are working to establish a more sustainable balance between supply and demand in the economy and will continue to do so.
“In light of this and the uncertainty surrounding the economic outlook, the board decided to hold interest rates steady this month. This will provide some time to assess the impact of the increase in interest rates to date and the economic outlook.”
He said some further tightening may be required to ensure inflation returns to target but that it will depend how the economy and inflation evolve.
Harvey Bradley, portfolio manager at Insight Investment, said: “The RBA left rates unchanged at their July meeting following the surprise 25-bp hikes at the two previous meetings. Australian government bonds rallied and the yield curve steepened after the announcement as the market had been assigning a 33 per cent chance of a 25-bp hike.
“The RBA continues to show willingness to take advantage of their more frequent meetings and have further time to assess the lagged impact of tightening delivered to date. The softer-than-expected May inflation data may have persuaded them to skip this meeting.
"It is clear every meeting will remain live from here and the market will remain very sensitive to the incoming data. We continue to expect that the RBA will likely deliver another one to two interest rate hikes in the coming months before an extended pause.”
Dwyfor Evans, head of APAC macro strategy at State Street Global Markets, said: “Cash rate left unchanged at 4.1 per cent. Initial comments on still high inflation and the prospect for additional tightening indicate remarks somewhat similar to recent Fed rhetoric and again the impact of higher wages and a tight labour market were highlighted.
“This looks a wait-and-see meeting and a gauge of impact from previous tightening. The bias of the remarks are sufficiently hawkish to keep further hikes on the table and ensure August remains a live meeting for policy change.”
AUTHOR
Laura Dew
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