Australia’s central bank leaves its key rate unchanged, says inflation ‘passed its peak’

Australia’s central bank held its official cash rate steady at 4.10% in a closely watched decision Tuesday.

Economists were split on expectations ahead of the decision, with 16 out of 31 respondents surveyed by Reuters forecasting a hike of 25 basis points and 15 expecting the central bank to hold.

Stocks cheered the move as the central bank said “inflation in Australia has passed its peak.” The S&P/ASX 200 pared earlier losses and rose 0.21%.

The Australia Bureau of Statistics’ monthly inflation indicator showed some cooling in the rise of prices at 5.6% for the month of May, led by housing prices, food and non-alcoholic beverages.

Australia’s monthly inflation indicator peaked at 8.4% in December. The economy’s consumer price index rose 7% in the first quarter of 2023.

The decision comes after the central bank raised its cash rate by 25 basis points last month — a move it described as a “finely balanced” decision, according to minutes from its June meeting.

It added that inflation risks have “shifted somewhat to the upside.” The RBA added that the inflation rate’s return to the central bank’s price stability target range of 2 to 3% was “already drawn out.”

Tuesday’s decision will revolve around similar discussions that took place in the RBA’s June meeting, Commonwealth Bank of Australia’s senior economist Belinda Allen said ahead of the decision.

“The recent data flow has been mixed and we think this affords the RBA some time to slow its hiking cycle,” said Allen, adding that the second-quarter CPI print will be closely watched ahead of the central bank’s next meeting in August.

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