Australia surprises market by holding rates steady (by Michael Kitchen)

LOS ANGELES (MarketWatch) -- The Reserve Bank of Australia surprised markets Tuesday by holding its policy rate unchanged at 3.75% after a string of increases at its previous three meetings. Analysts had on average expected a rate increase of 25 basis points to 4.0%. RBA Gov. Glenn Stevens said in a statement that consumer inflation "has risen somewhat recently as temporary factors that had been holding it down are now abating," but added that the level of inflation this year is expected to be consistent with the RBA's target. Stevens added that "interest rates to most borrowers nonetheless remain lower than average. If economic conditions evolve broadly as expected, the board considers it likely that monetary policy will, over time, need to be adjusted further." The Australia dollar fell immediately following the decision to 88.27 U.S. cents, down from 89.22 U.S. cents before the announcement.