KEY POINTS:
The Reserve Bank of Australia kept the nation's benchmark interest rate unchanged at 6.75 per cent this morning, amid uncertainty about global economic growth.
The central bank left the overnight cash rate target unchanged after lifting it 0.25 percentage points in August and again in November. Despite expectations for faster inflation, the bank decided today that it would remain in a holding pattern for now.
The central bank last month predicted that inflation, which it is required to keep between 2 per cent and 3 per cent, will be above 3 per cent in the first half of next year.
"The board remains concerned about the outlook for inflation," the bank said in a statement.
"But given the heightened uncertainty about the international outlook and the local trends in wholesale borrowing costs, both of which could have a bearing on inflation over the medium term, it judged that the current stance of monetary policy should be maintained for the time being."
The New Zealand Reserve Bank, which last raised the official cash rate a quarter percentage point in June, is expected to keep the benchmark rate at 8.25 per cent tomorrow. That's 1.5 percentage points more than Australia's rate and 3.75 percentage points higher than the US Federal Reserve's.
New Zealand's interest rate advantage over countries like the US has helped fuel demand for assets denominated in the kiwi dollar. New Zealand's currency, which breached 81 US cents and 91 Australian cents, rose against its Australian counterpart following the RBA's announcement today.
The kiwi dollar rose 0.17 per cent to 87.51 Australian cents at 12 pm New Zealand time, up from around 87.27 cents before the RBA decision.
