Australia Central Bank Keeps Rates Steady in Surprise Move

Australia’s central bank held its key cash rate steady at 3.75 percent on Tuesday, stunning investors who had confidently expected a rise to 4.0 percent and sending the local dollar tumbling.

However, the Reserve Bank of Australia (RBA) did say that  further rate rise were likely to be needed over time if the  economy improved as it expected.

RBA left its benchmark cash rate unchanged at 3.75  percent, saying since information on the impact of its last three hikes was limited, it had decided to pause for now, adding that lending rates for most borrowers remained lower than average.

“A big surprise they left rates unchanged. They made a couple of mentions of what might be triggering that, the Chinese slowing down their economy, and sovereign concerns have increased,” Stephen Walters, chief economist at JPMorgan, in response to the news.

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“I think they’re taking a tactical move to wait and see what’s going to happen over the next few months, and what the impact of the earlier rate hikes will be. They make it clear interest rates have to be adjusted, which  is code for going up, they’re just not sure about how quickly they need to do it, so they’re being tactical.”

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