The Reserve Bank of Australia kept the interest rate at a record low level of 0.1 percent for the 16th consecutive month. This was in line with market and investor expectations. In view of the fact that inflation in Australia has increased and may be accelerating, the bank's board is considering raising interest rates. Before it does so, it wants to see evidence that the level of price dynamics is sustainably within the 2-3 percent range.
The most significant change in the message from the Reserve Bank of Australia's (RBA) April meeting was the abandonment of its declaration of patience in maintaining ultra-low interest rates. This in turn seems to intensify speculation that the RBA may decide to raise interest rates as early as this summer.
A signal for the Australian currency
For the currency market and the Australian currency, this is potentially positive news. The AUD/USD exchange rate this morning appears to have risen to 0.7636, its highest level since June 2021. In the last month alone, the Australian Dollar against its US counterpart appears to have appreciated by more than 3%, which is arguably the best performance of the world's major currencies. The AUD's appreciation may be due not only to the current increase in the chances of rate hikes in Australia, but also to rising commodity prices.
What can Australia know about high inflation?
The Australian dollar may be growing into one of the stronger currencies in the world relative to the USD. Its economy may be doing quite well in the current macroeconomic and geopolitical environment. As one of the world's major mineral exporters, Australia can earn more as a country and create new investment and jobs. Importantly, inflation does not seem to be wreaking as much havoc on people's wallets as it is in Europe or the US. It is only 3.5 percent.
Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Forex service)
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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