Australia today froze interest rates at 4.5% for a fifth consecutive month over patchy global growth and moderating inflation, confounding widespread expectations of a rise.
Many analysts had tipped a hike of 0.25 percentage points to prevent overheating as Australia rides the biggest mining and energy boom in over 100 years, mostly in sales to fast-growing China and other Asian countries.
Reserve Bank of Australia governor Glenn Stevens said the cash rate was close to its average over the past decade, seen as 'appropriate for the time being'. But he warned it was likely to move higher 'at some point'.
'If economic conditions evolve as the board currently expects, it is likely that higher interest rates will be required, at some point, to ensure that inflation remains consistent with the medium-term target,' he said.
Stevens also cited flat asset values and subdued credit growth, adding that inflation had moderated to about 2.75% over the past year. 'That looks likely to continue in the near term,' he said.
The announcement means Australia has now left rates on hold since May, partly on concerns over the global recovery, after raising them off 49-year lows with six quickfire hikes from last October.
Stevens said growth in China and Asia was 'more sustainable but still strong' while warning of a more modest outlook for Europe and the US as the effects of the financial crisis linger.
'Financial markets are still characterised by a degree of uncertainty, and are responding both to differences in growth outlooks between regions and evident strains on public finances and banking systems in several smaller countries in Europe,' he said.
Australia, the only major Western country to avoid recession during the crisis, is clocking 3.3% annual growth and 5.1% unemployment, compared to the euro zone's 10% and 9.6% in the US.
