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Australian dollar firms after RBA keeps rates on hold
The RBA left the Official Cash Rate unchanged at 4.35%, but kept open the possibility of a fourth hike this year as inflation risks remain tilted higher.
The Australian dollar edged higher against major peers after the Reserve Bank of Australia left policy settings unchanged, even as the currency still traded marginally lower near 0.7050 per US dollar during the European session on Tuesday, according to FXStreet. The RBA decided to keep the Official Cash Rate at 4.35% for the second straight meeting and indicated it still has room to raise rates again, citing risks that inflation could stay biased to the upside. RBA Governor Michele Bullock said the central bank still needs to see progress before feeling confident on CPI and that it would raise rates again if needed. Despite that messaging, market experts cited by FXStreet said the RBA appears to have limited appetite for further tightening, pointing to the bank’s communication and updated near term conditions. Analysts at Ernst & Young also warned the decision should not be read as an inflation all clear, while Commerzbank noted updated projections revised unemployment expectations higher and short term inflation forecasts lower, suggesting less urgency for immediate action.