Australian dollar jumps on RBA rate decision

Financial and commodity markets analytics

The Australian dollar rocketed higher today after the latest interest rate decision from the RBA where they decided to keep rates on hold at 1.5 percent.

At 7.59 pm (GMT) the Aussie dollar was trading at US76.50c after surging as high as US76.88c and up from US76.06c in yesterday’s trading.

Siting a resurgent property market, and an expected increase in inflation, that Central Bank noted that it was comfortable keeping rates on hold, and they expect things will get better as time rolls on,

“Over the next year, the economy is forecast to grow at close to its potential rate, before gradually strengthening. Inflation is expected to pick up gradually over the next two years,” the RBA noted.

Some are now predicting that the next move in rates may be up and not down but one analyst in particular is warning against jumping the gun and that inflation would have to increase significantly for that to happen,

“The decision by the Reserve Bank of Australia to leave interest rates at 1.5 percent today may fuel some speculation that the next move in rates will be up, although not for a long time. That possibility shouldn’t be ignored”, noted Paul Dales from Capital Economics

“While the chances of further rate cuts have diminished, it is far too soon to conclude that the RBA’s low underlying inflation problem has been solved. So if underlying inflation fails to rise as fast as the RBA hopes in the second half of next year, then the Bank may yet cut rates to 1 percent” he added.


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