Markets doubt the Reserve Bank of Australia’s hawkish stance despite leaving rates at 4.35% and warning of further tightening.
The Australian Dollar (AUD) fell 0.17% to 0.7050 against the US Dollar (USD) in early European trading, extending a pullback from Wednesday’s two-month peak near 0.7090. The decline follows the Reserve Bank of Australia’s decision to hold its Official Cash Rate at 4.35%, as widely expected.
While the RBA reiterated its willingness to raise rates further to combat inflation risks, investors remain skeptical about additional tightening. Analysts noted Governor Bullock’s cautious tone, emphasizing uncertainty around economic forecasts and leaving the door open for a potential hike in Q4 if demand or energy prices surge.
Standard Chartered maintained its base case of no further rate increases, citing expectations that easing labor-market conditions will help contain wage and price pressures. However, the bank warned that upside risks persist if inflationary pressures reaccelerate.