MNI BRIEF: RBA Pauses at 4.1%, Time Needed "To Assess"

The Reserve Bank of Australia’s board left the target cash rate at 4.10% Tuesday, noting the cumulative impact of its 400bp hiking to date "are working to establish a more sustainable balance between supply and demand in the economy and will continue to do so."

In a statement, Governor Philip Lowe noted uncertainty over the economic outlook drove the decision to hold the rate steady. “This will provide some time to assess the impact of the increase in interest rates to date and the economic outlook,” Lowe said.

He pointed in particular to the monthly May CPI print, which showed a decline of headline inflation to 5.6% from April's 6.8% in June (see: MNI BRIEF: Aussie Monthly CPI Slows to 5.6%). Lowe said the Reserve will continue to pay close attention to both the evolution of labour costs and the price-setting behaviour of firms.

The Governor will provide further insight when he delivers the keynote address on July 12 at the Australian Conference of Economists in Brisbane.