RBA decision: Market participants gathered a sentiment of uncertainty in Philip Lowe's rhetoric and now fear that inflation will remain elevated for a prolonged time
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Reserve Bank of Australia decided to raise the interest rate by 25bp, let's hear from Serhii Zhdanov (EXMO), who shares his view with FXMAG.COM readers.
The Reserve Bank of Australia (RBA) raised interest rates for the 10th consecutive time, raising the target interest rate to 3.6%.
Serhii Zhdanov (EXMO): The Australian economy, like most countries, is now suffering from high inflation. Raising interest rates is a standard method of dealing with the problem.
While the rate was raised in line with expectations, RBA’s Governor, Philip Lowe's speech provoked negative sentiment. Market participants gathered a sentiment of uncertainty in his rhetoric and now fear that inflation will remain elevated for a prolonged time. This is facilitated by a strong service sector, low unemployment, and high wages. To reduce inflation, the market needs a shake-up, a cold shower. However, the above factors do not allow this to be achieved at present.
Expectations have also grown significantly that the rate will not only be raised for another couple of months in a row, but that it will remain at a high level for longer than expected.
The Reserve Bank of Australia, for the second consecutive meeting, says that the chances of a "soft landing" of the economy are small.
