- The Reserve Bank of Australia (RBA) maintained the cash rate at 4.35% following the latest meeting of the Bank’s Board.
- RBA statement notes financial market volatility
- RBA’s Bullock says no cuts expected for six months
RBA Delivers a Hawkish Hold
The Reserve Bank of Australia maintained the cash rate at 4.35% at today’s meeting. This marked the sixth straight time that the central bank has held rates at a 12-year high. The decision was fully priced in by the markets, but the rate statement and Governor Bullock’s press conference provided some drama in response to the sudden meltdown in global stock markets.
RBA statement Notes High Inflation, Global Market Volatility
The RBA statement noted that inflation had fallen significantly since its peak due to higher interest rates, but still remained above the midpoint of the 2%-3% target range. The Bank acknowledged that the “process of returning inflation to target has been slow and bumpy” and in latest forecast is that inflation will not fall to 2% until mid-2026.
The statement also expressed concern about the volatility in global financial markets, which has created an uncertain economic environment and pushed the Australian dollar lower.
Bullock Says No Rate Cut for Six Months
Governor Bullock stated in her press conference after the meeting that the Bank had given “very serious consideration” to a rate hike at today’s meeting and that there was no discussion of a rate cut. This was more of the same as the RBA discussed the possibility of a hike in the last several meetings. What was refreshingly candid was her statement that the RBA had no plans to cut rates for at least six months. Bullock phrased this bombshell delicately but the meaning was crystal clear.
Australian Dollar, Stock Markets Showing Strong Volatility
Australian Dollar Under Pressure
We are witnessing significant volatility in the currency and stock markets this week. The Australian Dollar against the US Dollar has declined 3.9% since July 15 as jittery investors are fleeing risk currencies like the Australian dollar and moving to safe havens such as the Japanese yen and US dollar. On Monday, the Australian dollar fell as much as 2.4% but managed to recover almost all of these losses. Still, the turbulence which has engulfed global markets could send the Australian dollar lower.
The Australian dollar bounced back today and rose 0.7% to 0.6540, but has pared most of these gains and is currently trading at 0.6502, up 0.11% on the day.
Stock Markets Steady After Monday’s Slide
Global stock markets have been in panic-mode since the soft US employment report on Friday. The S&P ASX 200 stock market index, Australia’s benchmark stock index, fell by 3.7% on Monday but has stabilized on Tuesday. The index closed on Tuesday at 7,680, up 31 points (0.41%).
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