Updates to add RBA decision, latest moves

Aug 6 (Reuters) -Australian shares pared some gains on Tuesday after the central bank held interest rates steady as expected, but reiterated that it was not ruling out further increases to control inflation.

The S&P/ASX 200 index .AXJO was up 0.2% at 7,666.8 points at 0443 GMT, after gaining as much as 0.8% earlier in the session. The benchmark index had slumped 3.7% on Monday, joining a global sell-off sparked by U.S. recession fears.

The Reserve Bank of Australia (RBA) kept rates at a 12-year high of 4.35% and said policy would have to be sufficiently restrictive to ensure inflation returned to target.

The RBA also cautioned that core inflation was likely to slow more gradually than previously thought and revised up the outlook for public spending and consumer demand.

It aims to keep inflation in a 2%-3% band over time with a focus on the midpoint of 2.5%.

On the domestic bourse, financial stocks .AXFJ rose 0.7%, with the "Big Four" banks gaining between 0.2% and 1.9%.

Real-estate stocks .AXRE, which are sensitive to shifts in interest rates, advanced 1%.

Energy stocks .AXEJ fell as much as 2.3% to hit their lowest since March 2022, dragged down by a near 5% drop in sector heavyweight Woodside Energy WDS.AX, even as oil prices rose. O/R

Woodside dropped as much as 5.5% to its lowest since February 2022 after investors questioned the timing and impact of its acquisition of OCI Global's OCI.AS clean ammonia project in Texas for $2.35 billion.

Gold stocks .AXGD fell 1.6%, tracking weak bullion prices, and miners .AXMM edged 0.2% lower.

In New Zealand, the benchmark S&P/NZX 50 index .NZ50 fell 0.3% to 12,234.61 points.

Reporting by Ayushman Ojha and Roshan Thomas in Bengaluru; Editing by Subhranshu Sahu and Mrigank Dhaniwala

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