Australia’s central bank pauses key interest rate at 3.6% after 10 hikes

Canberra: Australia’s central bank left its benchmark interest rate on hold at 3.6 per cent on Tuesday following evidence that inflation is falling.

It was the first monthly meeting at which the Reserve Bank of Australia board did not hike the cash rate since April 6 last year.

Australia’s annual inflation appears to have peaked in December at 8.4 per cent, falling to 7.4 per cent in January and 6.8 per cent in February. The bank manipulates rates to keep inflation within a target band of between 2 per cent and 3 per cent.

Bank Governor Philip Lowe said his board had halted the rise in interest rates to observe the full impact of the rate hike of 3.5 percentage points since May last year.

“The board recognises that monetary policy operates with a lag and that the full effect of this substantial increase in interest rates is yet to be felt,” Lowe said in a statement. “The board took the decision to hold interest rates steady this month to provide additional time to assess the impact of the increase in interest rates to date and the economic

outlook.”

There is growing evidence that the combination of higher interest rates, cost-of-living pressures and a decline in housing prices was leading to a substantial slowing in household spending, Lowe said.