The Reserve Bank of Australia announced its decision on monetary policy in September 2024, which came in line with expectations of fixing the interest rate by 4.35%, and the bank's statement was as follows:
- Inflation remains above the target range of 2% to 3%.
- The forecast is still very uncertain.
- Returning inflation to the target is the priority of the Australian central bank.
- Core inflation is still very high.
- Policy will need to be sufficiently restrained so that confidence returns that inflation is moving sustainably towards the target range.
- The Reserve Bank of Australia remains firm in its determination to return inflation to the target and will do what is necessary to achieve this result.
- The data have reinforced the need to remain vigilant about the rising risks of inflation.
- The Reserve Bank of Australia does not exclude anything related to the next policy steps.
They added only one paragraph to the statement about last month's statement, namely
“The latest forecasts in the August monetary policy report show that it will take some time before inflation becomes sustainable in the target range”.
This means that they may just have to keep prices high for longer, as it seems, and the market pricing towards the end of the year has not changed much, as the markets expectations of an interest rate cut were about 16 basis points of rate cuts by the end of the year previously, but now it is about 14 basis points now.
But the Bank of Australia emphasizes in its statement that the inflation battle is not over yet, and given this, they are not ready to cut the cash interest rate for the time being.
We expect the AUD pair to rise as a result of the difference in monetary policy between the two banks, since the Fed started cutting interest rates by 50 basis points last week and traders are even thinking about pushing this even further by pricing in stronger prospects for a repeat of the move in November.
As for the Reserve Bank of Australia, today the message is clear and Frank. Inflation is still the number one problem and they are not in a position to declare victory yet, so sticking with high interest for longer is the solution.
