The Bank of Australia seems to be a fairly conservative central bank, which does not surprise with big interest rate hikes, but raises them systematically. This time was no different at the last meeting of the year.
The Reserve Bank of Australia raised the interest rate by 25 basis points to 3.1% at its last meeting in 2022, matching market forecasts. The move marked the eighth consecutive rate hike, raising borrowing costs to levels not seen since November 2012, with the central bank announcing further increases as inflation in Australia is too high, tradingeconomics reports. The widely expected decision means the central bank has raised interest rates since May to 3 percentage points, the sharpest annual tightening of monetary policy since 1989. The committee reiterated that the interest rate is not a predetermined rate, as the size and timing of future increases will continue to be determined by incoming data. The council added that inflation in Australia will peak at around 8% this year, before weakening in 2023 and reaching just above 3% in 2024. Policymakers have reaffirmed their commitment to bringing inflation to target and will do whatever is necessary to achieve this.
Source: Conotoxia MT5, AUDUSD, Daily
Australian dollar exchange rate after the decision
From mid-October to today, the AUD has strengthened against the USD by almost 9%. Today, after the decision, the AUDUSD exchange rate rose to 0.6723, which may represent an increase of 0.4% since the beginning of the day. Thus, higher and higher peaks and higher and higher lows could be observed on the chart of the described currency pair, which may be characteristic of a potential uptrend. From the point of view of technical analysis, only overcoming the vicinity of 0.6640 could lead to the formation of a new low within the recent upward structure.
Interest rate hikes the cause of recession? Fitch thinks so
As reported by BBN, Fitch Ratings once again lowered its global economic growth forecast for next year, citing the intensification of interest rate hikes by central banks, as well as the worsening trend in China's real estate market. Fitch lowered its growth forecast by 0.3 percentage points to 1.4% for 2023, while seeing the U.S. economy with slight GDP growth. Chinese growth, on the other hand, is expected to rise 2.8% this year and 4.1% in 2023. The eurozone economy is also expected to grow slightly, thanks to the easing of the energy crisis. The rating agency also said that central banks in the US and Europe will continue to raise interest rates above initial estimates. At the same time, a recession could be expected in the Eurozone and the UK this year, and in the US in the second half of 2023, the agency added.
Source: Conotoxia MT5, US500, Weekly
Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service)
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