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Reserve Bank of Australia holds rate at 4.35% for fifth time

The Reserve Bank of Australia kept its cash rate without change at 4.35% at its June policy meeting, in line with market expectations.

The central bank noted that inflation still remained above the midpoint of its 2%–3% target range, mostly because of the still-high cost of services.

Recent macroeconomic figures have suggested the RBA will have to remain vigilant to upside inflation risks.

But still, there have also been indications of softening economic activity, with GDP growth slowing, jobless rate rising and wage growth being slower than expected.

“The statement on balance struck a somewhat hawkish tone, which suggests that the Board discussed another rate hike just as it did in April,” Marcel Thieliant, head of Asia-Pacific economics at Capital Economics, was quoted as saying by Reuters.

“Yet the Board already set a high bar for another upside surprise to its inflation forecasts. Accordingly, we still think that the next move will be a rate cut rather than a hike, but that’s unlikely to happen until early next year.”

Markets are now pricing in about a 56% chance of a RBA rate cut occurring in December, compared to a 64% chance prior to the policy decision.

The Aussie Dollar was last 0.28% firmer on the day against its US counterpart, with the AUD/USD currency pair trading at 0.6632.

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