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RBA Holds Rates Unchanged; Projection Change

RBA Holds Rates Unchanged; Projection Change, FP Markets

Overnight, the Reserve Bank of Australia (RBA) made the airwaves with its latest rate decision. In its first policy-setting meeting this year, the Board opted to leave the Cash Rate unchanged at 4.35%, a 12-year pinnacle.

Downward Revisions on Growth and Inflation

On one side of the fence, the accompanying Rate Statement retained a hawkish vibe, noting the following:

‘The path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe will depend upon the data and the evolving assessment of risks, and a further increase in interest rates cannot be ruled out’.

The Rate Statement also maintained that it is ‘resolute in its determination to return inflation to target and will do what is necessary to achieve that outcome’.

However, on the other hand, through the Statement of Monetary Policy (SoMP), which is released every three months, the central bank’s projections announced a downward revision to its growth and inflation forecast, alongside higher unemployment.

The RBA now anticipates CPI inflation (as well as trimmed-mean inflation) to cool to 2.8% by the end of 2025 (November’s forecast: 2.9%) and (for CPI inflation) to slow to 3.2% at the end of 2024 (November’s forecast: 3.5%). Unemployment will peak at 4.4% in mid-2025 and hold at this level until the year-end, with GDP growth expected to be at 2.1% in mid-2025 (down from November’s 2.2% reading).

RBA Holds Rates Unchanged; Projection Change, FP MarketsAUD/USD Bid on Hawkish Language

As evident from the AUD/USD charts, traders bid the exchange rate higher following the release, presumably lifted by the hawkish language in the Rate Statement regarding the possibility of higher interest rates in the future.

However, technically, this is unlikely to be enough to attract any meaningful follow-through buying. From the monthly scale, there is scope to explore lower levels following the rejection of what appears to be a long-term coil pattern between $0.7158 and $0.6170. Couple this with the break of support on the daily timeframe from $0.6502 on Monday and today printing a retest of the level as resistance could be enough to draw in further bearish interest that may see bears aim for daily support from $0.6397.

Monthly Chart:

RBA Holds Rates Unchanged; Projection Change, FP MarketsDaily Chart:

RBA Holds Rates Unchanged; Projection Change, FP MarketsDISCLAIMER:

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