Australia’s central bank left its benchmark interest rate on hold at 3.6% 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%, falling to 7.4% in January and 6.8% in February. The bank manipulates rates to keep inflation within a target band of between 2% and 3%.
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 recognizes 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.
“The board expects that some further tightening of monetary policy may well be needed to ensure that inflation returns to target,” Lowe said.
