Australia leaves key interest rate at 4.5%

Australia's central bank left its key interest rate unchanged at 4.5 per cent Tuesday, citing increased caution among investors in the wake of Europe's sovereign debt crisis.

The Reserve Bank of Australia's decision was widely predicted by analysts and ends its run of rate increases, for the time being.

"Concerns about sovereign creditworthiness in several European countries have been a focus of financial markets," central bank governor Glenn Stevens said in a statement explaining the rate decision.

"Investors have generally displayed a good deal more caution. As a result, equity prices have fallen and long-term government bond rates have declined outside of the countries most affected by the sovereign concerns."

Australia withstood the global economic crisis better than most developed countries, and the central bank's board has increased the interest rate six times since October.

But the Australian dollar and share market have taken a sharp hit over the past month amid fears about the impact of several debt-laden European countries on the global economy.

"Interest rates to borrowers are around their average levels of the past decade, which is a significant adjustment from the very expansionary settings reached a year ago," Stevens said. "Taking all the available information into account, the Board views this setting of monetary policy as appropriate for the near term."

- AP