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RBA holds rates steady at 4.35% but warns a further hike is possible
After the Reserve Bank of Australia left the cash rate unchanged for the second straight meeting, it said aggregate demand may need to stay subdued and swaps pricing moved to about a 50% chance of a November increase.
The Reserve Bank of Australia held its cash rate steady at 4.35% for a second straight meeting, saying the economy was slowing as expected, but warning it could raise rates again if needed to bring inflation back to target, Reuters reports.
RBA Governor Michele Bullock took a hawkish tone at the post-meeting press conference, saying she personally views another hike as quite possible and that the bank would go again if required, while also noting the board is thinking carefully about timing amid uncertainty including the re-escalation in the Middle East conflict.
The RBA said aggregate demand needed to stay subdued to reduce capacity pressures, and it would do what was necessary to control inflation, including increasing the cash rate target further if upside risks materialise.
In market reaction, the Australian dollar was flat at $0.7055 and 3-year government bond yields rose 2 basis points to 4.572%, while swaps implied roughly a 50% chance of a rate increase in November and about an 80% likelihood of a move by early next year.