Reserve Bank of Australia hikes Interest rates to .35 percent, while Inflation Turns Up

Published May 3, 2022 2:00 am est
by Richard F. Cason,

Key Take away’s-

RBA board Raised the cash rate target by .25 bases points to .35 percent
RBA also raised the interest rate on Exchange Settlement balances from 0 per cent to 25 bases points
AUD immediately strengthens against the USD by 60 points to a swing high of .07146 exchange rate
RBA Board increased rates mainly because of overheated 1st Qt headline inflation rate of 5.1 percent
RBA also agreed that it was appropriate to begin withdraw some of extraordinary monetary support put in place to assist the Australian economy during the pandemic
Board noted that various impediment’s has caused ongoing uncertainties about the global economy- arising from COVID-19 , especially it main trading partner China, as well as the Russian Ukraine conflict and declining consumer purchasing power fr0m higher inflation

The Reserve Bank of Australia board met in Sydney, Australia lead by the honorable Governor Philip Lowe who released the monetary policy statement on May 03, 2022.

The Board officially agreed to raise the cash rate to .35 percent. as well as the Exchange Settlement balances from 0 per cent to 25 bases points. This was done on the heals of an over heated first quarter headline inflation rate of 5.1 percent well above the reserve central bank’s AUD economic target rate goal of 2.0 percent inflation. The Board also acknowledged that it expects the inflation to peak about above 6 percent some time this year.

After the News release hit the wire the AUDUSD immediately soared higher from an intra low of .7046 to a high of .7146. As of this writing the AUDUSD is trading at .7118, 72 Points Higher from the low set 7 hours earlier. The Australian dollar has strengthen significantly against the USD in overnight trading. As of 3:01 am AUDUSD exchange rate is .07087 up .51% about 5 hours prior to the opening bell of the New York American trading session.

Be sure to catch our informative story on Reserve Bank of New Zealand 2022 rate hike, RBNZ Raise the OCR to 1 Percent, NZDUSD Makes 68 Point Bullish Run Feb 22, 2022

The RBNZ committee said that is committed to doing what is necessary to ensure that inflation in Australia returns to target over time. This will require a further lift in interest rates over the period ahead. The Board will continue to closely monitor the incoming information and evolving balance of risks as it determines the timing and extent of future interest rate increases.