AUD/JPY establishes above 90.00 as RBA favors gradual balance sheet easing program

• AUD/JPY climbs to near 90.60 as RBA sees a modest pace in the quantitative easing program.
• The RBA raised its cash rates by 25 bps as a measure to contain the soaring inflation.
• Japan’s CPI numbers have increased to 2.5% on annual basis.

The AUD/JPY pair has displayed a firmer upside move after remaining lackluster in the early Tokyo session. The risk barometer remained in a minor range of 90.18-90.44 and now has climbed strongly to near 90.60 after Reserve Bank of Australia (RBA)’s Christopher Kent commented that the central bank is in no hurry to kick-start its balance sheet reduction process.

The recent surge in the price pressure forced the RBA to elevate its interest rate by 25 basis points (bps) for the very first time after the Covid-19 pandemic in May’s monetary policy announcement. The move was completely unexpected as the RBA did mention in their comments that the central bank is not seeing rate hikes sooner.

As RBA has paddled up its rate cycle, the market participants started thinking that the RBA will also initiate its balance sheet reduction program to speed up the inflation-controlling process. Now, the RBA has dictated that the central bank is in no mood to bank upon quantitatively easing vigorously.

RBA Christopher Kent dictated that the Bank will continue to be able to maintain effective control over the cash rate as it withdraws monetary policy stimulus in the period ahead,' as per Reuters.

Meanwhile, higher-than-expected inflation numbers in Tokyo are expected to cut the sheer size of stimulus packages provided by the Bank of Japan (BOJ) to spurt the growth rate. Annual Japan’s National Consumer Price Index (CPI) figure at 2.5%, significantly higher than the estimates of 1.5% and the prior print of 1.2.