The Central bank of Australia has kept interest rates at 4.35% (a 12-year high), but warned that it still needs to be vigilant about inflation risks. The Central Bank also reiterated that it was not ruling anything in or out on policy.
"The economic outlook remains uncertain, and recent data have shown that the process of returning inflation to the target level is unlikely to be smooth. Meanwhile, the revision of the level of consumption and savings indicates the persistence of risks to growth," the RBA said.
Since the last RBA meeting, economic data has mostly been in line with expectations. The economy grew by just 0.1% on a quarterly basis, while wage growth slowed from a 15-year high and the labor market continued to weaken at a slow pace. Meanwhile, inflation, as expected, rose to a 5-month high of 3.6% in April, but the hope is that cost-of-living relief from governments will help bring headline inflation lower in the second half. Overall, most economists now expect the RBA to cut rates only in the 4th quarter of this year.