Australia's central bank stuck to its neutral stance on Tuesday but acknowledged downside risks to growth have increased both globally and at home as local data showed shoppers kept their wallets tightly shut during Christmas.
The Reserve Bank of Australia (RBA) trimmed its forecasts for growth and inflation in a sign that a rate hike was far off the horizon even as it met expectations in leaving policy at a record low 1.50 percent for a 30th straight month.
The local dollar jumped following the statement as it sounded less dovish than the markets had wagered on. Yet, interest rates futures continued to price in a 50-50 chance of a rate cut by the end of the year, reflecting the deteriorating growth momentum in the face of rising global and domestic risks.
"As is the case globally, some downside risks have increased (for the Australian economy)," Governor Philip Lowe said in the post-meeting statement.
"The main domestic uncertainty remains around the outlook for household spending and the effect of falling housing prices in some cities."
Lowe, however, stopped short of providing an explicitly dovish signal, even after the U.S. Federal Reserve last week all but abandoned plans for further rate hikes, citing slowing global growth as one of the reasons.
The RBA is loathe to easing policy further and has repeatedly said the next move in rates would be an increase.
While Tuesday's statement refrained from committing to the direction of the next move in policy, investors will get further clues about the RBA's thinking at a speech by Lowe on Wednesday, followed by the central bank's quarterly outlook two days later.
Lowe gave a hint of the RBA's forecasts on Tuesday, saying the A$1.8 trillion would likely expand around 3 percent this year, a slightly more cautious view compared to "a little above 3 percent" in its previous statement.
The RBA chief did say a pick-up in inflation would take longer than earlier expected, but stuck to his earlier prediction for the unemployment rate to fall to 4.75 percent over the next couple of years.