Australia's Reserve Bank Holds Interest Rate At 4.35%, Warns Of inflation Risks

The Reserve Bank Of Australia (RBA) retained its 12-year-high interest rate at 4.35% for the fifth time, even as it did not rule out a future hike.

At the end of the two-day policy meeting, the RBA decided to retain the interest rate, which was set last November, but added the need to be alert against inflation risks.

Though the first quarter witnessed a stalled economy with slow growth in wages and rising inflation preventing rate cuts, markets have still wagered on a stable outcome, Reuters reported.

The RBA board pointed out that revisions to consumption and saving rate may not mitigate the upside.

"The economic outlook remains uncertain and recent data have demonstrated that the process of returning inflation to target is unlikely to be smooth. While recent data have been mixed, they have reinforced the need to remain vigilant to upside risks to inflation," the board stated.

Economists expect the RBA to cut rates in the last quarter of the year.

As the RBA's decision to retain the interest rate was expected, the market response was subdued, with the Australian dollar improving about 0.1 U.S. cents to about 66.2 U.S. cents, The Guardian reported.

Based on data by RateCity, mortgage holders are paying a monthly interest of about AU$1,450 on a AU$600,000 loan, since the RBA implemented the cycle of 13 rate rises in May 2022.

Pointing to the cut in interest rates by the Swiss, Canadian and European central banks, Anders Magnusson, an economics partner at BDO, said, "Australia's economy is not yet ready to follow. While the unemployment rate remains historically low, the labor market is clearly easing as job vacancies and average hours worked per week decrease."