RBA Maintains The Interest Rate At 4.10%, Signals More Rate Hikes
Australia's central bank kept its interest rate steady at the recent meeting but made it clear that more rate hikes may happen.
The reason behind this brief stop was to asses the exact impact of the rate hikes done in the past. However, the RBA appears to remain committed to continuing the tightening campaign. This also reveals that inflation remains a big problem for the RBA as it shapes all of its policies towards it!
RBA Keeps Interest Rate at 11-Year High
At July's policy meeting, the RBA (Reserve Bank of Australia) kept the interest rate unchanged, which is now sitting at an 11-year high. The interest rate in Australia was last raised in May by 400 basis points, which took it to 4.10%.
For the most part, the market players were anticipating a pause in the rate hikes, while the economists were not so sure about that outcome.
After the decision by the RBA, the Australian Dollar (AUD) slipped 0.4% against the USD and was last seen at $0.06647. For the upcoming RBA meeting in August, the market is now pricing in a 50% chance of a rate hike which will take the cash rate to 4.35%.
At the meeting, the RBA governor talked about how higher interest rates are needed to ensure a balance between demand and supply. He also added that the RBA wanted to get a clearer picture of the economic outlook after the recent rate hikes.
For now, the biggest uncertainties for the RBA are the global economy and household consumption. So once the RBA gets its hands on more economic data, the path ahead will become clear.
According to one expert, the RBA's decision to pause the rate hike reveals that the Australian economy is affected by global economic conditions.
In theory, the RBA is planning to hurt the economic progress by cutting down the consumption, which allows the inflation to go down as well.