RBA protocol pulled Australian dollar down
June 20, 2023 10:22 amVideo
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The Australian dollar fell after the Reserve Bank of Australia released its minutes of the meeting, which indicated an unexpected rate hike due to inflation caused by tight labor market conditions and rising housing prices.
The minutes revealed that the RBA board discussed the pause it had taken previously, but concluded that new arguments now favored a rate hike to 4.1%, a level not seen since April 2012. The decision came after the monthly inflation reading for April accelerated.
The Australian dollar fell and the yields on three-year bonds dropped by six basis points because traders did not consider the protocol to be particularly hawkish.
Following the release of the minutes, Deputy Governor Michele Bullock warned that unemployment would need to rise to 4.5% from the current 3.6% in order for inflation to return to the target level. Official forecasts indicate that the overall consumer price index will reach 2-3% by mid-2025, from a current 7%.
In addition to the tight labor market and inflation acceleration, factors related to mortgage lending and the decision to raise the minimum wage by 5.75% influenced the RBA’s decision. According to the latest data, the Australian economy slowed down more than expected, with business confidence dropping into negative territory, and consumer sentiment fluctuating near its lows.
The material has been provided by InstaForex Company – www.instaforex.com
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