Australia keeps key interest rate on hold

MELBOURNE

Australia left its key interest rate unchanged yesterday, with central bank governor Philip Lowe saying previous hikes were "working" but the outlook was uncertain.

The pause is the second in a row that the rate has been kept on hold at 4.1 percent, following a string of rises aimed at taming runaway prices.

Lowe said inflation, which sits at 6.0 percent, is "declining but is still too high," against a background of rising rents, below-trend growth and weak household consumption.

Holding the rate will "provide further time to assess the impact of the increase in interest rates to date and the economic outlook," he said, adding that inflation was expected to return to the bank's target of 2-3 percent by late 2025.

This "remains the board's priority."

Stocks rose just before the news, with the benchmark ASX 200 up nearly 0.5 percent but the Australian dollar fell against the U.S. dollar.

News of the pause will come as a relief to mortgage holders, who have seen their monthly repayments rise rapidly over the past year.

Central banks raise rates to make borrowing more expensive, reducing the buying power and demand of consumers and businesses, which usually pushes prices down.

Many other central banks have been tightening monetary policy in recent months in an attempt to soften food and energy prices, which have been exacerbated by the war in Ukraine.

The U.S. Federal Reserve increased its benchmark lending rate in July. But New Zealand left its key rate unchanged last month following a number of hikes.