Australia unexpectedly holds policy rate as it awaits more inflation data

• Australia's central bank held its policy rate at 3.85%, saying it needed more time to assess inflation data.
• The Reserve Bank of Australia said it was waiting for “a little more information to confirm that inflation remains on track to reach 2.5 per cent on a sustainable basis.”

Australia's central bank held its policy rate at 3.85%, saying it needed more time to assess inflation data.

Economists polled by Reuters had been expecting a cut of 25 basis points to 3.6%.

In its statement Tuesday, the Reserve Bank of Australia said it was waiting for “a little more information to confirm that inflation remains on track to reach 2.5 per cent on a sustainable basis.”

“While recent monthly CPI Indicator data suggest that June quarter inflation is likely to be broadly in line with the forecast, they were, at the margin, slightly stronger than expected,” the central bank added.

Australia's inflation came in below expectations at 2.1% in May, the lowest since October 2024. In the first quarter, inflation was at 2.4%, staying at a four-year low.

Just after the data release, the S&P/ASX 200 index fell 0.24%, while the Australian dollar strengthened 0.79%.

Australia is currently struggling with a growth slowdown as public spending shrinks and as consumer demand and exports weaken.

The country recorded a 1.3% expansion in the first quarter of the year, missing Reuters poll expectations of 1.5%.