AUD/USD Dips to One-Week Low as RBA Holds Policy, Rates Steady
As was widely expected by markets, the RBA left its official cash rate (OCR) at record low rates close to zero for the sixth consecutive
As was widely expected by markets, the RBA left its official cash rate (OCR) at record low rates close to zero for the sixth consecutive meeting since the beginning of the coronavirus pandemic over a year ago. Holding its monetary policy steady, the RBA announced the decision to keep rates at 0.1% even as the Australian economy bounces back strongly from the crisis, as the central bank waits for more clarity on recovery in wages and inflation.
After the RBNZ hinted at a possibility of looking into tightening its monetary policy amid rapid economic recovery, there was some hope that the RBA might also follow suit and drop hints about similar action. However, the Aussie central bank’s governor Philip Lowe maintained that officials needed to ensure that pressure on wages and inflation remain subdued before a shift in their stance from dovish to hawkish.
Even though the Australian economy has been recovering at a rapid pace, there are some worries weighing on the outlook, especially after its second most populous state – Victoria, went back into lockdown mode amid a fresh surge in cases. In addition, the RBA stated that it will not consider a rate hike until inflation falls within the target of 2-3%, which according to their estimates is unlikely to happen until mid of 2023.
Following the release of the RBA’s announcement, commodity currency AUD dipped to the lowest level seen in a week to $0.7740 against the US dollar and remains not too far from this level as of now. At the time of writing, AUD/USD is trading at around $0.7741.
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