SYDNEY: Australian shares notched up their best week in 12 on Friday, helped by robust gains in banks as the country’s central bank left borrowing costs unchanged at a 12-year high earlier this week.

The benchmark index S&P/ASX 200 ended 0.8% higher on Friday, rising 2.2% for the week - the most since the week ended Aug. 16.

The Reserve Bank of Australia (RBA) remained unconvinced that the economy was ready for rate cuts, even as inflation dropped to a more than three-and-a-half-year low in the third quarter.

Financials closed the week 3.6% higher. Banks tend to thrive in a high interest rate environment.

Commonwealth Bank of Australia, the country’s largest lender, gained 3.6%, while ANZ climbed 3.4% for the week.

“Our assessment is the RBA wants to see at least one more quarterly print of lower inflation, before it considers cutting rates,” UBS said in a note.

“Hence, the earliest timing for the first RBA rate cut remains after the Q4-2024 quarterly inflation data, received ahead of its meeting in February 2025.”