May 2 (Bloomberg) -- Australia's central bank board met today and probably decided to keep interest rates unchanged for a 14th month as high gasoline costs threaten to cool the economy.

Seventeen of 21 economists surveyed by Bloomberg News say the Reserve Bank of Australia will keep the overnight cash rate target at 5.5 percent when it announces a decision at 9:30 a.m. tomorrow.

Gasoline prices are at a record, which may curb a recovery in consumer spending that was expected to stoke growth in Asia- Pacific's fifth-largest economy this year. Annual inflation is within the central bank's target range of between 2 percent and 3 percent. The economy expanded at its slowest pace in four years in 2005, and key drivers of growth such as consumer spending and home building have only recently shown signs of recovering.

``Consumer spending has only been rising for a couple of months. Petrol prices would have to ease and wages growth would have to pick up before the bank had grounds to act,'' Craig James, chief equities economist at Commonwealth Bank of Australia, said in Sydney.

Inflation picked up from a 2.8 percent annual pace in the fourth quarter to 3 percent in the first quarter. James said this isn't enough to spur central bank Governor Ian Macfarlane to raise rates yet.

``Later in the year, the Reserve Bank may need to tap the brakes by increasing interest rates. The justification isn't there now,'' he said.

Seven economists in the Bloomberg News survey forecast the bank will raise rates this week or in June, and 15 say it will happen by the end of the year.

Gasoline Prices

Traders have increased their bets the central bank will raise interest rates by the end of the year.

The implied yield on a December 90-day bank bill futures contract reached 6.03 percent today in Sydney, the highest in 13 months. The yield was 6.02 percent at 4:30 p.m. in Sydney.

The median probability of an increase this week is 40 percent, according to the Bloomberg News survey.

Gasoline costs rose 7 percent to a record A$1.34 ($1.01) a liter in April, which may curb consumer spending.

Consumer spending remains ``constrained'' and higher fuel prices could make this worse, said Roger Corbett, chief executive officer of Woolworths Ltd., Australia's biggest grocery store chain. Corbett is a member of the central bank's rate-setting board.

``The more you move up between A$1.30 and A$1.40, the more you see it start to affect everywhere,'' he said in April. ``You might see a move from the sirloin steak to the minced.''

Motorists may face persistent prices of A$1.40 a liter or more, Dick Warburton, chairman of Caltex Australia Ltd., the country's largest oil refiner, told reporters last week.

Record Debt

Consumers are sensitive to higher fuel prices because they are carrying record debt, Commonwealth Bank's James said.

``The Reserve Bank has to be really sensitive to the amount of debt people have,'' he said.

The average balance on credit cards that accrue interest was a record A$1,988 in February, the central bank reported last week.

The central bank does not explain its decision if interest rates remain unchanged. Macfarlane will release his quarterly statement on monetary policy on May 5 at 11:30 a.m. in Sydney.

A slowdown in consumer spending last year cooled economic growth to 2.5 percent, its slowest pace since 2001.

Signs of recovery in consumer spending, which accounts for about 60 percent of Australia's economy, emerged in recent months. Retail sales rose twice as much as economists expected in February, the government reported in March. Housing finance jumped 1.1 percent in March, according to a report last month.

To contact the reporter for this story: Hans van Leeuwen in Sydney at hvanleeuwen1@bloomberg.net.

Last Updated: May 2, 2006 02:45 EDT