CANBERRA—Homebuyers have been spared further interest rate pain, with the Reserve Bank of Australia (RBA) leaving its official cash rate unchanged after today's monthly board meeting.
The central bank's decision to leave the cash rate at 7.25 per cent was widely expected by economists.
Although inflation remains stubbornly high, recent data suggests 12-year-high interest rates are beginning to have the desired impact of slowing domestic demand.
This should help to curb inflation pressures over time, economists say.
The RBA has raised interest rates four times since last August, and a total of 12 times since May 2002.
In a statement accompanying the board's rate decision, RBA governor Glenn Stevens said there is considerable uncertainty in the outlook for both demand and inflation.
He said price rises are widespread and to reduce inflation demand needs to slow significantly.
"Evidence is accumulating that this is occurring," Mr Stevens said.
"Indicators of household spending have recorded subdued outcomes over recent months, and demand for credit by both households and businesses has weakened."
He said there has been a substantial tightening in financial conditions after the RBA's recent rate increases and additional hikes by retail banks.
However, the rise in Australia's terms of trade will add substantially to national income and ability to spend.
"Given the opposing forces at work, considerable uncertainty remains about the outlook for demand and inflation," Mr Stevens said.
"On balance, the board's current assessment is that demand growth will remain moderate this year.
"In the short term, inflation is likely to remain relatively high, but it should decline over time provided demand evolves as expected.
"Should demand not slow as expected or should expectations of high ongoing inflation begin to affect wage and price setting, that outlook would need to be reviewed."
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