SYDNEY, June 18 Reuters Australia39;s central bank held interest rates steady on Tuesday as expected but warned there were still reasons to be vigilant against inflation risks, leading markets to pare back the chance of a rate cut this year.

Wrapping up its June policy meeting, the Reserve Bank of Australia RBA kept rates at a 12year high of 4.35, where they have been since a hike in November last year. It repeated that it was not ruling anything in or out on policy.

Markets have heavily wagered on a steady outcome even as the economy almost halted in the first quarter and wage growth unexpectedly slowed, with still elevated inflation preventing rate cuts in 2024.

The economic outlook remains uncertain and recent data have demonstrated that the process of returning inflation to target is unlikely to be smooth, the RBA Board said in a statement, noting that the revisions to consumption and the saving rate suggest risks to the upside remain.

While recent data have been mixed, they have reinforced the need to remain vigilant to upside risks to inflation.

The Australian dollar was little changed at 0.6612 as the statement contained few surprises, while swaps slightly pared back the chance of a rate cut in December to 55 from 65 before the decision.

Since the RBA39;s last meeting, when Governor Michele Bullock said policy rates were already restrictive enough, data has come in largely as expected. The economy grew a meagre 0.1 on a quarterly basis, while wage growth…