RBA hikes interest rates by 50 points

Source: Dukascopy Bank SA
On July 5, the Reserve Bank of Australia hiked its base interest rate by 50 base points, as the rate was increased from 0.85% up to 1.35%.

However, the hike was expected by the market consensus forecasts. Previously, in June and May the central bank was hiking more than the market participants expected.

Meanwhile, the RBA revealed that inflation in Australia is lower than in other countries. Moreover, the bank is prepared to react to incoming data and adjust its policy accordingly.

Quoting the statement: "At its meeting today, the Board decided to increase the cash rate target by 50 basis points to 1.35 per cent. It also increased the interest rate on Exchange Settlement balances by 50 basis points to 1.25 per cent.

Inflation in Australia is also high, but not as high as it is in many other countries. Global factors account for much of the increase in inflation in Australia, but domestic factors are also playing a role.

The Board expects to take further steps in the process of normalising monetary conditions in Australia over the months ahead. The size and timing of future interest rate increases will be guided by the incoming data and the Board's assessment of the outlook for inflation and the labour market. The Board is committed to doing what is necessary to ensure that inflation in Australia returns to target over time."

Released Document

Statement by Philip Lowe, Governor: Monetary Policy Decision

The AUD/USD reacted to the rate hike with a decline, as the AUD/USD pair initially dropped by 0.43% or 29 base points.

On a larger scale, the pair has been descending in a channel down pattern since late April.

Initial Reaction

Larger scale situation

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