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Commerzbank’s Volkmar Baur reports that the Reserve Bank of Australia (RBA) left interest rates unchanged in a unanimous decision, with forecasts showing higher unemployment and lower short-term inflation. While medium-term inflation risks justify the possibility of further hikes, he states that the next move is likely a rate cut, suggesting the Australian Dollar (AUD) may stay under pressure over coming months.
RBA keeps rate unchanged, rate cut expected
“As expected, the Reserve Bank of Australia left interest rates unchanged this morning. Contrary to speculation, this decision was also unanimous. Some market participants had anticipated a dissenting vote in favor of raising the benchmark interest rate, but this expectation was not met.”
“Furthermore, the statement does not read particularly hawkish. The new forecasts revised the expected unemployment rate upward, while short-term inflation forecasts were revised downward.”
“Only in the medium term were inflation forecasts revised upward, which likely explains the statement that further rate hikes are certainly conceivable and that inflation risks remain on the upside.”
“All in all, it must be said that the decision and the forecasts seem to be in line with market expectations; the AUD is showing little movement in its initial reaction, at least.”
“In the medium term, we continue to expect that the RBA’s next move will be an interest rate cut, so the AUD is likely to remain under pressure in the coming months.”
