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Oz rates hit 12 year high

Jaimie Kanwar

Australia's central bank has decided to hold interest rates at a 12-year high of 7.25%.

Amid signs of a slowdown in the economy, the Reserve Bank of Australia had been widely expected to keep rates on hold for a fourth consecutive month

The bank has lifted rates 12 times since May 2002 in a bid to keep inflation within the 2.0-3.0 percent target range.

In a statement, Governor of the Reserve Bank, Glenn Stevens, said: "Evidence suggests that earlier rate rises, combined with higher petrol prices, are working to restrain demand.

"However, rising prices of oil and a range of other commodities are adding to global inflationary risks. Considerable uncertainty remains about the outlook for demand and inflation but on balance, the central bank believes that demand growth will be moderate this year.

"Indeed, the most recent flow of information has given additional support to that assessment.

Peter Jolly, head of research at nabCapital added: "Even if second-quarter inflation figures released later this month were high, the bank was aware inflation would trend lower in the medium-term if the economy was slowing.

"I think there is a lot more confidence you can see in the wording about the slowing being on track," he said.