Australia holds interest rates steady for third month in a row

Australia's central bank held rates steady for the third consecutive month as signs that inflationary pressures were easing continued.

The cash rate was maintained at a decade-high 4.1%. Philip Lowe, who was delivering his final rate decision after seven years as the Reserve Bank of Australia's governor, said that while inflation was still above the bank's 2 - 3% target band, it was now falling.

“In light of this and the uncertainty surrounding the economic outlook, the board again decided to hold interest rates steady this month. This will provide further time to assess the impact of the increase in interest rates to date and the economic outlook,” he said in a statement.

The September pause widely expected amid a growing consensus that rates would remain on hold now that the economy was slowing and price growth was easing rapidly.

However, Lowe left open the possibility or more increases in the coming months. “Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will continue to depend upon the data and the evolving assessment of risks,” he said.

Sean Langcake, head of macroeconomic forecasting at Oxford Economics Australia, said wage growth "was a touch underwhelming" in the second quarter, although a further pickup is expected in the following three months due to award wage increases.

"More broadly, the labour market remains in a very tight position, and will continue to pose an upside risk to inflation," he said. "Our forecast is for rates to remain on hold until late 2024."

"With inflation now falling and expectations staying well anchored through the current episode, it seems unlikely inflation expectations will start to creep up in the near term."

Reporting by Frank Prenesti for Sharecast.com