The Reserve Bank of Australia today left its main policy rate, the cash rate, unchanged at 3.60 percent, in line with the consensus forecast. Since it began to normalise policy settings last May the RBA had raised policy rates by a cumulative 350 basis points. Headline inflation slowed from 7.4 percent in January to 6.8 percent in February, still well above the RBA's target range of 2.0 percent to 3.0 percent, but indicating that this previous policy tightening is having an impact on price pressures.

Officials have judged that Australian inflation peaked in late 2002 and the statement accompanying today's decision notes that incoming data supports that assessment. They expect price pressures to moderate further in coming months and retain their forecast for inflation to fall to around 3.0 percent by mid-2025. Officials also note that growth is slowing in response to policy tightening, cost of living pressures, and falling house prices, and that they expect unemployment to increase.

In today's statement officials have reaffirmed that their priority is to return inflation to the target range and have again promised they"will do what is necessary to achieve that". They also warn that this determination to subdue inflationary pressures will present downside risks to the growth outlook, reiterating that"the path to achieving a soft landing remains a narrow one". They advise that"some further tightening of monetary policy may well be needed to ensure that inflation returns to target", but also stress that they will monitor developments closely to determine when and how much further rates need to rise.

With inflation moderating and retail sales slowing, the Reserve Bank of Australia is expected to hold rates steady at its April meeting though there are outside expectations for a sixth straight 25-point hike.

The Reserve bank of Australia (RBA) announces its monetary policy with regard to interest rates on the first Tuesday of each month with the exception of January when it is on vacation. The RBA is the central bank of Australia and its duty is to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people. It does this by setting the cash rate to meet an agreed medium-term inflation target, working to maintain a strong financial system and efficient payments system.

The Reserve Bank of Australia's (RBA's) main responsibility is monetary policy. Policy decisions are made by the Reserve Bank Board with the objective of achieving low and stable inflation over the medium term. Other responsibilities include maintaining financial system stability, while at the same time promoting the safety and efficiency of the payments system. The RBA regards appropriate monetary policy as a major factor contributing to the Australian dollar's stability, which in turn leads to full employment and the economic prosperity for Australia.

The RBA is unique among the central banks - it has two boards with complementary responsibilities. The Reserve Bank Board is responsible for monetary policy and overall financial system stability. The Payments System Board has specific responsibility for the safety and efficiency of the payments system.

The RBA sets an interest rate at which it lends to financial institutions. This interest rate then affects the whole range of interest rates set by commercial banks and other institutions for their own savers and borrowers. It also tends to affect the price of financial assets, such as bonds and shares, and the exchange rate, which affect consumer and business demand in a variety of ways. Lowering or raising interest rates affects spending in the economy.

The level of interest rates affects the economy. Higher interest rates tend to slow economic activity; lower interest rates stimulate economic activity. Either way, interest rates influence the sales environment. In the consumer sector, few homes or cars will be purchased when interest rates rise. Furthermore, interest rate costs are a significant factor for many businesses, particularly for companies with high debt loads or who have to finance high inventory levels. This interest cost has a direct impact on corporate profits. The bottom line is that higher interest rates are bearish for the financial markets, while lower interest rates are bullish.