The Reserve Bank of Australia RBA has left its cash rate unchanged at 4.10% following the latest meeting of the Bank’s Board, after raising rates at the past two meetings. forexnews
this month would provide the RBA with more time to assess the strength of the economy and the impact of interest rate increases on the economy.
Ahead of the RBA decision, the markets were split close to 50/50 as to whether the RBA would raise rates by 0.25% for a third consecutive time or take a pause. There were strong reasons for either move. Employment and retail sales remain strong and are proof that the economy can withstand further rate increases. Also, inflation is running at 5.6%, well above the RBA's 2% target.
In the end, RBA policymakers decided to maintain rates, but the move was a “hawkish pause,” with the RBA statement noting that inflation is still too high and will remain so for some time. The RBA said that further tightening could be required to bring inflation to target, a clear message that this pause is likely temporary and should not be viewed as the end of the current tightening cycle.
Where does the RBA go from here? Tuesday’s rate statement noted that inflation has “passed its peak" while at the same time warning that inflation risks have shifted to the upside. In other words, inflation is on its way down, but the battle is not over yet.
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