Central banks have been raising interest rates in a hectic manner since the beginning of the year, trying to curb surging prices, although without much effect until now. This has been hurting the global economy and the sentiment in financial markets, but they will stop with rate hikes at some point. The Reserve Bank of Australia seems to have reached that point and they played it straight in the last meeting, hinting that rates are now in neutral territory.

In the last meeting they said that:

“The further increase in interest rates today will help bring inflation back to target and create a more sustainable balance of demand and supply in the Australian economy. Price stability is a prerequisite for a strong economy and a sustained period of full employment. The Board expects to increase interest rates further over the months ahead, but it is not on a pre-set path. The size and timing of future interest rate increases will be guided by the incoming data and the Board’s assessment of the outlook for inflation and the labour market. The Board is committed to doing what is necessary to ensure that inflation in Australia returns to target over time.”

As the RBA removed the reference to ‘normalisation’, they added the point on ‘price stability’ being a necessary goal that they are targeting. In other words, this appears to be a hint that the cash rate is now in neutral territory but considering that there is no change to the language on forward guidance, they will continue to deliver on rate hikes for as long as necessary and as long as they can get away with it.

AUD/USD Daily Chart – MAs Keeping the Trend Bearish

The decline is picking up pace as the RBA is hinting on rate hike pause 

Of course, all of that still depends on the FED as well. The US central bank is very much at the wheel and spearheading the global central bank tightening course, with the RBA merely being the passenger. For now, carry on as you will.

AUD/USD Live Chart