As expected, the Reserve Bank of Australia decided to The Reserve Bank of Australia kept official interest rates at a 12-year high of 4.35%. For its sixth consecutive meeting in August.
The Central Bank confirmed that High inflation remains a concern.Inflation has “declined significantly” but is “persistently above” the 2% to 3% target range, the report said. The closely watched quarterly core consumer price index has also fallen “very slightly” over the past year.
Reserve Bank of Australia detailed,
“The data has reinforced the need to remain vigilant against upside risks to inflation, and the Fed is not ruling anything out.”
Meanwhile, the Central Bank admitted that Economic momentum has slowed.With unemployment high and businesses under pressure, the RBA said household consumption could recover more slowly than expected, leading to lower output growth and a “notable deterioration” in the labour market.
In its quarterly economic outlook, the Reserve Bank of Australia noted that Inflation is expected to reach the target range of 2%-3% by late 2025. Inflation will reach the midpoint by 2026. This is a slight revision from the May forecast when inflation was expected to reach the target by 2025.
The central bank also expects higher unemployment and lower potential growth throughout the forecast period, which should help curb excess demand and bring inflation back to target.
the Quarterly unemployment rate GDP growth is expected to reach 4.3% by the end of the year (up from 4.2% in May) before rising to 4.4% by 2025.
headline economic inflation UK inflation is expected to ease to 3.0% by the end of the year, much slower than the 3.8% forecast in May, while average inflation could fall to 3.5% (up from 3.4% in May).
on Cash ratesThe RBA expects interest rates to be cut by 25 basis points by early 2025 and to fall to 3.3% by the end of 2026. This is a lower trajectory compared to its May forecast of 3.8% by 2026.
Link to the RBA Monetary Policy Statement for August
At her press conference, RBA Governor Michelle Bullock revealed that members discussed raising interest rates as an option, but ultimately decided that current cash rate levels were “appropriate”.
Bullock reiterated his concerns about rising inflation, saying progress “has been slow for a year now” and that there are still risks that “inflation will take a long time to get back to target.”
What’s more interesting is that the Reserve Bank of Australia Governor It effectively ruled out the possibility of cutting interest rates in the next six months.
She noted that markets are “pricing in a rate cut by the end of this year,” but that a near-term rate cut “is not in line with the board’s thinking.” In fact, Bullock believes “Interest rates may have to stay higher for longer.”
Link to RBA Governor Bullock’s press conference
Australian Dollar vs Major Currencies: 5 minutes
Comparison between the Australian Dollar and major currencies Chart by TradingView
Asian traders took advantage of the gains in the US session and pushed the Australian dollar higher early in the day.
But the Australian dollar quickly gave up its early gains, likely due to a lack of fresh catalysts or traders remaining on the sidelines ahead of the RBA event.
The Australian dollar rose about 15 minutes before the RBA decision and held its gains for about an hour after the official statement confirmed rising inflation rates in the economy.
The Australian dollar then traded in ranges and saw renewed buying pressure as RBA Governor Bullock responded to calls for a rate cut. Unfortunately for optimists, the Aussie did not hold onto its gains and fell back to pre-RBA levels at the London open.
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