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08/08/24
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AUD Higher on RBA Saying Rates May Rise
The week has been busy for the Australian dollar and on Thursday it showed strong gains. AUD/USD traded at about 0.6550, up 0.50% for the day in the European session.
Governor Bullock reaffirmed her hawkish stance on monetary policy two days after the Reserve Bank of Australia kept the cash rate steady. Bullock dropped a bombshell at the meeting and said she didn’t believe a rate cut was on the cards for at least the next 6 months.
Earlier today, Bullock said the central bank wouldn’t hesitate to hike rates if required, adding that the alternative of persistently high inflation was worse. At recent meetings, the RBA discussed rate hikes and Bullock said today the RBA board had specifically considered a rate hike at the last meeting.
The Australian dollar responded to Bullock’s hawkish comments with strong gains.
At the meeting on Tuesday, the central bank decided to keep rates at the 12-year high of 4.35% for the 7th consecutive time.
This is solely due to inflation which remains persistent, especially services prices. The RBA is forecasting that CPI, which increased to 3.9% in Q2, won’t drop to the 2-3% target until late next year. The labor market is still tight due to large-scale immigration, which will make it tricky for the RBA to cut rates.
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