Australia Central Bank Unexpectedly Maintains Status Quo

(RTTNews) - The Reserve Bank of Australia adopted a wait-and-see approach on Tuesday, defying expectations for a quarter-point rate cut but confirmed that an easing cycle is coming.

The policy board, governed by Michele Bullock, decided to hold the cash rate target at 3.85 percent.

A majority of six members voted to hold the rate, while three members sought a change from 3.85 percent.

The current rate was the lowest in two years. Previously, the bank had reduced the rate by 25 basis points each in May and February.

Bullock said there is no shift in the direction of policy but rather a delay in timing.

"With the cash rate 50 basis points lower than five months ago and wider economic conditions evolving broadly as expected, the Board judged that it could wait for a little more information to confirm that inflation remains on track to reach 2.5 percent on a sustainable basis," the bank said in a statement.

The board noted that monetary policy is well placed to respond decisively to international developments if they were to have material implications for activity and inflation in Australia.

The board said it continues to judge that the risks to inflation have become more balanced and the labour market remains strong. However, it remains cautious about the outlook, particularly given the heightened level of uncertainty about both aggregate demand and supply.

Regarding trade protectionism, the board said the final scope of US tariffs and policy responses in other countries remains unknown but financial market prices rebounded with an expectation that the most extreme outcomes are likely to be avoided.