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04/10/23
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AUD Drops After RBA Keeps Rates Steady
On Tuesday the Australian dollar was sharply lower and AUD/USD traded at about 0.6295, 1.05% down in the European session.
It is clear the RBA is relaxed about this pause phase, as policymakers kept the benchmark rate at 4.10% for the fourth straight time. The move was generally expected, and future markets had priced in a pause at about 95%.
Although the meeting was the first with Michele Bullock at the helm, the message from the RBA was similar to what it has been recently. Bullock said once again that additional rate hikes were still on the table and that rate policy would be driven by key economic reports including inflation.
In August inflation unexpectedly rose to 5.2% from 4.9%, the board said that most of the upswing was due to volatile items like energy prices. Inflation is however still much higher than the target range of between 2% and 3%, and unless inflation drops significantly, the RBA may be forced to hike rates another time before the end of this year.
The Q3 inflation report is due to be released later in the month, which may go a long way in determining what the RBA has to do at the meeting in November.
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