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The Reserve Bank of Australia kept its cash rate without change at 4.35% at its August policy meeting, in line with market expectations.

The central bank noted that inflation still remained above the midpoint of its 2%–3% target range, mostly because of the still-high cost of services.

The RBA cautioned that policy would need to remain sufficiently restrictive to ensure core inflation returned to target.

“Continued vigilance to upside inflation risks that again indicate no rush from the RBA to adjust rates, particularly as the labour market remains tight and fears over the inflationary impact of fiscal measures in the medium term,” Dwyfor Evans, head of APAC macro strategy at State Street Global Markets, was quoted as saying by Reuters.

“We still consider the RBA as a G10 laggard in terms of normalising interest rates.”

Markets are now pricing in about a 68% chance of a RBA rate cut occurring in November, compared to an 88% chance prior to the policy decision.

Meanwhile, RBA Governor Bullock said at the regular press conference that the Board considered a rate hike and was ready to raise interest rates if necessary.

Bullock also noted the market was pricing in rate cuts too early and it did not align with the Board’s thinking.

The Aussie Dollar was last 0.20% firmer on the day against its US counterpart, with the AUD/USD currency pair trading at 0.6507.

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