Interest rates remain at 4.1 per cent, the highest level in 11 years

 
The Australian central bank held interest rates steady on Tuesday, saying it needed more time to assess the impact of past rate hikes, but warned that further tightening might be necessary to rein in inflation.

After raising rates by 400 basis points in May last year, the Reserve Bank of Australia (RBA) held its cash rate at an 11-year high of 4.1 per cent at its July policy meeting.

This is the most aggressive rate hike campaign in the bank’s modern history.

Markets had been pricing in a pause, but many economists had expected further rate hikes. Three out of Australia’s Big Four banks had expected a further rate hike, with only the Commonwealth Bank predicting the pause.

RBA Governor Philip Lowe said during the Tuesday meeting that that higher interest rates were working to strike a balance between supply in the economy

“In light of this and the uncertainty surrounding the economic outlook, the Board decided to hold interest rates steady this month,” he said.

Lowe also repeated warnings that further tightening might be required as inflation remains elevated and is expected to be so for some time.

After pausing in April, the RBA resumed raising rates in June and May in an aggressive campaign that has many in the economy fearful of tipping into recession.