The Reserve Bank of Australia (RBA) sounded dovish in its monetary policy statement, despite delivering the third straight 50bps hike, according to strategists at TD Securities.
“Despite the fact that inflation is now expected to stay elevated at 4% by Q4' 2023, above the Bank's 2-3% target inflation band, markets focused on the addition of the Bank's guidance that the policy normalisation ahead is not on a pre-set path.”
The monetary policy statement suggested that “the Bank has dialled down its focus on returning headline inflation back into the 2-3 percent target range "next year" (as was noted in Statements earlier this year) and it has now shifted to achieve this "over time". In contrast, inserting "keeping the economy on an even keel" suggests the Bank is placing more emphasis on growth and hence engineering a soft landing.”
“If the Bank really wanted to get on top of inflation and return it back into the 2-3% target band next year, it could raise rates aggressively. However the fact that it expects inflation to remain well above its target band in 2023 at 4% implies the Bank is in no pressing rush to normalise monetary conditions rapidly. In other words, rapid 50bps hikes are becoming less likely, as hiking aggressively could adversely impact growth.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.