RBA leaves the cash rate unchanged at 4.10%

  • Prior 4.10%
  • Higher rates are working to establish a more sustainable balance between supply and demand in the economy and will continue to do so
  • In light of this and the uncertainty surrounding the economic outlook, the RBA decided to hold interest rates steady this month
  • This will provide some time to assess the impact of rate hikes to date and economic outlook
  • Inflation in Australia has passed its peak
  • Growth in the Australian economy has slowed and conditions in the labour market have eased
  • A significant source of uncertainty continues to be the outlook for household consumption
  • Some further tightening of monetary policy may be required
  • The decision to hold rates steady provides more time to assess the state of the economy
  • Remains resolute in its determination to return inflation to target and will do what is necessary to achieve that
  • Full statement

The balance of the decision was rather fine as market pricing was seeing roughly 63% odds of no change, and the RBA delivered on that. The statement reads as a pause or potentially just a “skip”, as they continue to maintain the recent forward guidance that “some further tightening may be required”.

Market players are still nonetheless anticipating another rate hike in August and from the communication, it doesn’t sound like the RBA is going to put that off the table for now. They are saying that this is a pause to reassess but we may hike rates again.

Naturally, the aussie has dropped on the decision considering the pricing as there were roughly 37% odds of a 25 bps rate hike baked in. But the drop isn’t too substantial with AUD/USD falling from around 0.6680 to 0.6645 currently.

This article was written by Justin Low at www.forexlive.com. Source