Ultima Markets

On Tuesday, Australia’s central bank reaffirmed that rate cuts are unlikely in the short term, keeping its policy rate steady at 4.35%. However, it eased its hawkish tone by indicating that further monetary tightening was not on the agenda. Governor Michele Bullock noted that while the board didn’t actively consider a rate hike, they did review whether their hawkish communication needed adjustment. 

(Reserve Bank of Australia Cash Rate, Source: Forex Factory) 

The policy will remain restrictive until the Board is assured that inflation is on a sustainable path towards its target range. Market participants had largely expected a steady decision, considering that core inflation remains persistently high, and the labour market continues to perform robustly. With core inflation stuck at 3.9% last quarter and strong job creation, there seems to be no rush for policy easing, unlike the Federal Reserve’s move last week, cutting rates by 50 basis points to preempt potential job losses. 

The RBA is lagging behind other central banks in reducing rates, and political pressure is growing for a shift towards easing. Additionally, the Australian Dollar reached multi-month highs as China’s aggressive stimulus package bolstered risk sentiment. Global markets were uplifted by China’s latest suite of support measures, which included significant rate cuts and stock market support, boosting investor confidence. 

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