AUD/USD Below MAs Again After the RBA Holds Rates at 4.35%

Early today we had the Reserve Bank of Australia policy meeting which was anticipated to hold rates unchanged, with markets pricing in a 97% chance that the Cash Rate will remain at 4.35%. The RBA delivered a 25 basis points rate hike in the last meeting, which was widely anticipated, though it said that whether further tightening of monetary policy will depend on economic performance and the evolving assessment of risks

AUD/USD has been bullish since early October, although this has come mostly from the USD side, after dovish comments made by the FED, who is not expected to hike rates again either as inflation continues to slow in the USD as well. The RBA also indicated that while inflation in Australia has passed its peak, it remains too high and is proving to be more persistent than projected a few months ago, with CPI inflation now expected to be about 3.5% by the end of 2024 and below 3% by the end of 2025.

The RBA’s Statement showed that they considered holding policy rates unchanged, but decided a hike would provide more assurance on inflation, while also acknowledging data in recent months indicated the domestic economy had been a bit stronger than previously thought.

Recent economic data releases have been mixed, while recent softer monthly inflation numbers ensured a pause at today’s meeting. So, there were no expectations for a hike today, and the RBA held rates unchanged at 4.35%.

Reserve Bank of Australia Monetary Policy Decision

• RBA December cash rate 4.35%
• November cash rate was 4.35%
• The data and the ongoing risk assessment will determine if further monetary policy tightening is required to guarantee that inflation returns to target in a reasonable timeframe.
• The Board is steadfast in its aim to return inflation to target.
• The minimal information on the domestic economy obtained after the November meeting has been roughly consistent with foreca
• The outlook for household consumption is similarly questionable.
• The monthly CPI indicator for October revealed that inflation is continuing to decline, with the goods sector driving the trend; however, the inflation update did not provide much additional information on service inflation.
• Inflation expectations continue to be consistent with the inflation objective.
• Labor-market conditions have also gradually improved, but they remain tight.

AUD/USD Live Chart