AUD Strengthens, RBA Expected to Hike Interest Rates
The Australian dollar gained support after the market predicted the Reserve Bank of Australia (RBA) would continue to raise interest rates. This expectation arose ahead of the RBA's monetary policy decision this week, amid renewed inflationary pressures due to surging energy prices and geopolitical tensions in the Middle East.
The market expects the RBA to raise interest rates by 25 basis points to 4.35%, which would be the third consecutive hike this year. The ABC reported that most economists, including those at major Australian banks, expect such a hike, although there are still arguments to hold rates as core inflation is starting to show signs of stabilizing.
The main pressure on the RBA comes from inflation, which remains above target. The RBA itself targets average inflation in the range of 2%–3%, but the surge in gasoline prices due to the Middle East conflict has raised the risk of inflation rising again. In its March decision, the RBA raised the cash rate by 25 basis points to 4.10%, indicating that the central bank remains focused on controlling inflation.
For market participants, the RBA's hawkish stance could be a positive sentiment for the AUD, especially if the gap between Australia's interest rate expectations and those of other countries remains attractive. However, interest rate hikes also carry risks for the domestic economy, particularly the property sector, household consumption, and the stock market. Therefore, the direction of the AUD depends not only on the interest rate hike decision, but also on the tone of the RBA's statement following the announcement. (CP)
Source: Newsmaker.id
