RBA departs interest rates on hold as it remains to see impact of previous increases

August 2, 2023: On Tuesday, the Reserve Bank of Australia is helding interest costs at 4.1% for a second month as the central bank accepted time to assess the impact of previous hikes while offering future ones.

This decision to hold rates steady comes as inflation in Australia slowed to 6% in the double quarter from 7% in the first quarter but was still well beyond the RBA’s declared target of 2% to 3%.

Economists were divided on whether the Australian central bank would raise interest speeds at this conference, with a slim majority predicting a 25-basis point hike.

“The higher interest rates stand working to establish a more sustainable balance amid supply and must in the economy and will continue to do so,” Governor Philip Lowe stated.

“In light of this and the uncertainty surrounding the economic outlook, the Board again decided to steady good rates this month. This will provide additional time to assess the impact of the surge in interest rates to date and the financial outlook,” he added.

The Australian dollar opened earlier losses against the dollar after the announcement. It was selling down almost 0.7% at about 0.67 to the dollar in afternoon trading in Asia.

The Australian central bank has hiked interest prices by a cumulative 400 basis points since May in the previous year to its highest in 11 years. The country has been grappling with surging inflation as economic activity increased following the height of the Covid-19 pandemic.

“While the RBA has a tightening bias, we expect the hurdle to another rate is high,” Commonwealth Bank of Australia economists said in a note. “It would take an upside surprise to the economic data from here, namely on prices and wages, for the RBA to shift its outlook assessment.”