Australian central bank leaves rates on hold as credit demand slows

SYDNEY, August 5, 2008 (AFP) – Australia’s central bank left interest rates unchanged Tuesday at a 12-year high of 7.25 percent and indicated borrowing costs could fall amid signs of an economic slowdown. “They’re clearly signaling the next move is down,” Oster said.

The central bank said it still expected inflation to remain relatively high in the short term, but believed that it was likely to decline over time provided the outlook for demand and wage growth remained moderate.

“The bank’s forecast remains that inflation will fall below three percent during 2010,” Stevens said.

Australia and other countries in the Asia-Pacific have wrestled in 2008 with the twin challenges of slowing growth and high inflation stoked by fuel and food costs.

The spotlight currently is on cooling economic expansion, which has pushed the price of crude oil and other commodities sharply down in recent weeks.

The falls could lead to lower inflation, which was driven higher in resource-rich Australia partly due to the economic boost from Chinese-led demand for commodities.

Stephen Roberts, a Sydney-based economist for Lehman Brothers, said the Australian central bank would likely feel comfortable a