Reserve Bank of Australia chief Philip Lowe said the coronavirus is having a 'significant'effect' on the country's economy
Reserve Bank of Australia chief Philip Lowe said the coronavirus is having a 'significant'effect' on the country's economy

The Reserve Bank of Australia (RBA) has kept interest rates steady at 4.35% for the seventh consecutive meeting.

The long-awaited move stands in contrast to the U.S.' Federal Reserve's recent decision to ease interest rates, Reuters reported.

The Australian dollar had initially surged to a nine-month high of $0.6869 before falling to $0.6820. Markets now price in a 72% chance of a rate cut by year-end.

The move will work largely to keep inflation in check even as global economic trends shift, with the RBA working to bring inflation back to its target range of 2-3%.

"While headline inflation will decline for a time, underlying inflation is more indicative of inflation momentum, and it remains too high," the board said in a statement. "Policy will need to be sufficiently restrictive until the Board is confident that inflation is moving sustainably towards the target range."

With the current move, the RBA has defied the global trend of rate cuts, as the U.S. spearheaded the easing cycle with a 0.5 percentage point rate reduction. Major economies like the European Union, the U.K. and Canada were cutting rates to stimulate growth.

Following the Federal Reserve's move, China also lowered interest rates on the eve of the RBA's announcement. As a result, in the comparatively high interest rate environment, investors sought bigger profits, and the Australian dollar shot up to its peak of 68.53 US cents in 2024.

"Inflation has fallen substantially since the peak in 2022, as higher interest rates have been working to bring aggregate demand and supply closer towards balance," RBA said in a statement, ABC reported. "But inflation is still some way above the midpoint of the 2–3% target range."

"In underlying terms ... inflation was 3.9% over the year to the June quarter, broadly as forecast in the May Statement on Monetary Policy (SMP). The most recent projections in the August SMP show that it will be some time yet before inflation is sustainably in the target range."

When asked about his two cents on the RBA's recent decision, Treasurer Jim Chalmers said he didn't "second guess decisions."

"I've made a factual statement that the interest rate rises, which are already in the system, combined with some of these other factors, are slowing our economy quite dramatically," he said.