The Royal Bank of Australia announced today that it will keep its key interest rate unchanged at 4.75 percent as was widely expected. Investors were focusing on the statement after the policy meeting to look out for any key words that would signal any future rate hikes, however the RBA seemed in no hurry to increase what are already the highest rates in the developed world. The news sent the Aussie Dollar lower.
The Australian central bank’s statement surprised many in a sense because it was a change from its monetary policy outlook from just a month ago when it said a further tightening would likely be needed to contain inflation amid a record mining boom.
“It seems they’ve taken a step back on tightening,” said Brian Redican, a senior economist at Macquarie. “We thought they would be more hawkish than this. But, on the surface, it does suggest there’s no urgency to pull the trigger on rates.”
Australia already has the highest rates in the developed world thus far since the RBA has lifted its benchmark rate by 175 basis points since late 2009.
Despite this, some analysts are optimistic enough to expect an increase sometime in the third quarter.
“It still looks to be August in our view,” said Michael Workman. “We expect one rate hike in August and one in November, taking the cash rate to 5.25 percent by year end.”
Most investors reacted to today’s news by selling off the Aussie Dollar bringing it down 77 pips from 1.0748 to 1.0670.