SYDNEY, May 7 — Australia’s central bank held interest rates for a fourth straight meeting today, while noting inflation was easing more gradually than hoped and that it was vigilant to upside price pressure risks.

Wrapping up its two-day May policy meeting, the Reserve Bank of Australia (RBA) kept rates at a 12-year high of 4.35 per cent.

However, it stopped short of reinstating a tightening bias as some economists had expected after first quarter inflation and the labour market failed to cool as much as expected.

The Australian dollar slipped 0.4 per cent to US$0.6600, while three-year bond futures YTTc1 rallied 7 ticks to 96.05 and markets trimmed bets of another hike this year with an implied probability of 32 per cent for September from 43 per cent before.

"Recent data indicate that, while inflation is easing, it is doing so more slowly than previously expected and it remains high,” said the RBA in a statement, adding that it would remain vigilant to upside risks.

"The path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe remains uncertain and the Board is not ruling anything in or out.”

The RBA dropped its explicit tightening bias in March and did not consider a hike as the economy slowed to a crawl and inflation looked to be on track to ease to its 2-3 per cent target band in late 2025.

However, the bank’s latest forecasts show inflation is expected to pick up to 3.8 per cent and stay there until the end of the year. It hit 3.6 per cent in the first quarter.

Inflation slowed less than expected in the first quarter, underlining a home grown inflation challenge, while recent labour market data confirmed only a gradual loosening, with the jobless rate at 3.8 per cent in March.

Globally, other central banks are also struggling in their last mile attempts to get inflation back to their targets, complicating the outlook for eventual rate cuts.

The Federal Reserve is now expected to cut less than twice in 2024, a change from about six reductions priced in at the beginning of the year. — Reuters