The Reserve Bank of Australia (RBA) held its benchmark monetary policy rate steady at 4.75%. The RBA said: "Year-ended CPI inflation has been high, affected by the extreme weather events earlier in the year. As these effects reverse over the next couple of quarters, CPI inflation should decline. But measures that give a better indication of the trend in inflation have begun to rise over the past six months, after declining for the previous two years." The Bank also noted: "Board remains concerned about the medium-term outlook for inflation", and noted "it is appropriate under such circumstances for monetary policy to exert a degree of restraint."
The Bank also kept the cash rate unchanged at 4.75% at its previous meeting in July this year, the RBA last increased the interest rate by 25 basis points in November last year. Australia reported annual consumer price inflation of 3.6% in Q2 this year, up from 3.3% in Q1, and 2.7% in the December quarter of 2010, and just outside the Bank's inflation target of 2-3%. The Australian economy shrank -1.2% during the March quarter due to the impact of natural disasters; placing year on year GDP growth at a slower pace of 1.2%.