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RBA lifts rates to 4.60% but signals less urgency for more tightening
The RBA delivered a unanimous 25 bps hike and reiterated it could raise the cash rate target further if needed, but Governor Michele Bullock’s comments eased expectations for additional hikes.
Brown Brothers Harriman said the Reserve Bank of Australia delivered a widely expected 25 bps rate hike to 4.60%, a 15-year high, and kept the door open to further tightening. The decision was unanimous, with the RBA pointing to inflation upside risks that it said were materializing.
According to Brown Brothers Harriman, AUD/USD initially rose on the hawkish reaction to the statement, then reversed after RBA Governor Michele Bullock signaled less urgency for additional tightening. Brown Brothers Harriman added that Bullock’s remarks about the possibility that prior hikes could prove sufficient reduced the hawkish tone.
Brown Brothers Harriman also noted that RBA cash rate futures implied 36 bps of further tightening over the next 12 months, which the firm said could limit policy divergence with the Fed and support the Australian dollar. The newsletter further stated the RBA reiterated readiness to increase the cash rate target further if needed, as part of its latest communication.