The RBA surprised the markets this morning by raising the cash rate by 25 basis points. The most recent rate hike raised the Cash Rate to 4.10%. The RBA also boosted the interest rate paid on Exchange Settlement balances by 25 basis points to 4.00%.

The RBA Rate Statement states that

While inflation has peaked, it remains excessive and will take some time to return to the desired range.
This rise in interest rates will give investors more confidence that inflation will return to goal within a reasonable timeframe.

The Board is concerned about the possibility that expectations of continued high inflation contribute to higher price and pay increases. As a result, the Board will keep a careful eye on labor expenses and pricing patterns.
Notably, the Board intends to keep the economy on track while reducing inflation back to goal, although the route to a soft landing remains narrow.
The outlook for household consumption and the global economy remain uncertain.

The Australian Dollar outperformed other majors due to the rate hike. AUD/USD surged from $0.66260 to a post-RBA high of $0.66733 in response to the rate hike and is now consolidating around the level of 0.6662.

Technical outlook.
AUDUSD could further advance towards the 0.6700.

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