The Reserve Bank of Australia on Tuesday decided to keep its benchmark cash rate unchanged at 4.25 percent against economists' expectations for a quarter-point reduction. This followed two consecutive rate cuts towards the end of 2011 to support the economy amid global slowdown.
In a statement today, RBA Governor Glenn Stevens said that with growth expected to be close to trend and inflation close to target, the Board judged that the current setting of monetary policy was appropriate for the moment.
"Should demand conditions weaken materially, the inflation outlook would provide scope for easier monetary policy," he said. Following the announcement of the decision, the nation's currency surged to a six-month high against dollar and a fresh record high against euro.
Stevens said interest rates for borrowers have declined to be close to their medium-term average, as a result of the actions at the Board's previous two meetings.
"Much remains to be done to put European sovereigns and banks on a sound footing, but some progress has been made," the policymaker said. "Financial market sentiment, though remaining skittish, has generally improved since early December."
RBA said growth in China, Australia's major trading partner, has moderated as was intended, but on most indicators remained quite robust through the second half of last year.
According to the central bank, information on the Australian economy continues to suggest growth close to trend, with differences between sectors. Labor market conditions softened during 2011, while CPI inflation declined as expected.
The bank expects year-ended CPI inflation to fall further over the next quarter or two. Over the coming one to two years, and abstracting from the effects of the carbon price, the bank expects inflation to be in the 2-3 percent range.
The government expects the economy to grow 3.25 percent this fiscal year as well as the next. The RBA will release its latest GDP and inflation predictions in Statement on Monetary Policy on February 10.
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June 12, 2026 17:14 ET Major central bank action was the focus this week in economic news. The European Central Bank became the first major central bank to move in response to the rising inflationary pressures in the backdrop of the conflict in the Middle East. In North America, the U.S. inflation and trade data as well as Canada’s central bank decision gained attention. The Chinese trade data was the main news in Asia.