RBA pauses, but negative effect on AUD to be limited as further rate hikes are on the cards – Commerzbank

The Reserve Bank of Australia (RBA) left the monetary policy rate unchanged at 3.60%. However, the Aussie is unlikely to weaken significantly as the end of the rate hike cycle might not yet have been reached, economists at Commerzbank report.

RBA not excluding further rate hikes

“RBA left its key rate unchanged at 3.6%. After the RBA hiked its key rate by a total of 3.5 percentage points over the past quarters it now sees scope to wait for the effects of monetary policy tightening so far. On the other hand, it remained concerned that it might see a wage-price spiral and confirmed that it would pay close attention to the evolution of labour costs and the price setting behaviour of firms. It thus signalled that the end of the rate hike cycle might not yet have been reached.”

“In an initial reaction, AUD eased slightly as there had been some market participants who had expected a rate hike. However, as the statement sounds quite hawkish, with the RBA not excluding further rate hikes, the negative effect on the AUD is likely to be limited. In particular, since the market might have to lower its rate cut expectations for this year a little in view of the RBA’s hawkish approach.”