Australia's RBA Holds Rates as Inflation Cools, Warns Hike Still an Option

• Australia's central bank held interest rates steady on Tuesday but cautioned that a further increase could not be ruled out given inflation was still too high, a strong signal that it isn't in a hurry to start easing policy anytime soon.
• The relatively hawkish tone of the central bank's statement boosted the Australian dollar and saw futures push out the likely timing of a first easing to September from August. Wrapping up its first policy meeting of the year, the Reserve Bank of Australia (RBA) kept rates at a 12-year high of 4.35% but left the door open to another rise if needed.
• Markets had wagered heavily on a steady outcome given inflation had eased by more than expected in the fourth quarter, but the RBA statement indicated it was still not confident that inflation was on a sustainable path towards its 2%-3% target.
• "While recent data indicate that inflation is easing, it remains high... The Board needs to be confident that inflation is moving sustainably towards the target range," said the RBA Board in a statement.
• The central bank did trim its forecasts for inflation and economic growth but emphasised demand was still running ahead of supply, suggesting it would be in no rush to cut rates.

(Source: Reuters)