- The Australian Reserve Bank is expected to reduce profitable identification centers by 25 basis points.
- The Australian basic inflation declined in the last quarter of 2024, but it remained over the RBA goal.
- The Australian dollar reinforces gains against its American rival before the announcement.
The Australian Reserve Bank (RBA) will announce the first financial political decision for 2025 on Tuesday, and the market participants expect that the Board of Directors will reduce the standard interest rate by 25 basis points (BPS).
Since walking long distances at the official cash price (OCR) to 4.35 % in November 2023, RBA has maintained its stability at this level, as inflation remained stubbornly. As a result, pressure on families and companies has become a great concern, as slow economic growth affects the decisions of politics makers.
Will this be the first discounts in multiple interest rates in Australia?
In fact, inflation in Australia gave signs of improvement in December, which increased the chances of reducing the interest rate in February.
The latest semester Consumer price index (CPI) showed that inflation rose less than expected in the last quarter of 2024. The RBA preferred inflation scale, which is the average medium consumer price index, increased by 0.5 % in a quarter, less %, below from the previous 3.5 %.
The growth of strong employment, on the other hand, negatively weighs the chances of cutting the interest rate. The annual employment growth was strengthened to 3.1 % in December from 2.3 % in November, which is the strongest rate since October 2023. Australia is expected to add 20,000 new jobs in January after the creation of 56.3K in December. However, recruitment data in January will not be available until after the RBA monetary policy was announced.
In December, RBA’s decision to explain showed that “some of the upward risks of inflation have eased, while the total demand level continues to go beyond the offer of the economy, this gap continues to close.”
However, the meeting minutes that were released after two weeks included a modest change in the drafting. The officials “gain some confidence” that inflation was moving sustainable towards their 2 % and 3 % goal.
The ruler of RBA Michelle Bullock also indicated that the board of directors discussed that the risk of upscale inflation had eased but did not disappear, however it was not reduced interest rate on the table.
In general, players in the market expect a reduction in prices, but they do not expect this to be the first among many. On the contrary, RBA is expected to maintain its cautious approach to cash relief. The current restrictions settings are likely to be not bound at a slow pace.
How will the Australian Reserve Bank decision affect Aud/USD?
If RBA announces a reduction in the interest rate of 25 bits per second, the AUD (AUD) may be under the pressure pressure. However, how twice the AUD depends on what political makers expect. If the council announces an unexpected pruning by 50 points per second or declares more discounts in the upcoming meetings, this will be a major drop for psychology.
On the contrary, hints may push the discounts at the rates of spaced interest to the top, as they will be read as a “strand”.
RBA ruler Michel Bullock A press conference will be presented after the announcement and it will have to explain a lot if the decision is different from expectations.
Valeria Bidnarik, Senior Analyst in FxstreeetHe says: “He reached the peak of the AUD/USD husband at 0.6373 before the announcement, which is the highest level since mid -December. US dollar (USD) weakness. Greenback has been trading on the back foot since the financial markets have understood US President Donald Trump’s financial measures Federal Reserve (Nutrition) in the path of honesty. “
“In fact, it is possible that the uncertainty about what the American definitions of the Australian economy may mean is part of the RBA Declaration,” Bidnarik added.
Technically, the AUD/USD pair has an area to extend his progress towards a zone 0.6470, where the husband displays the highest high levels of stent during the past few months. To reach such a height, the husband first needs to overcome an increase inside the day, which is the level of resistance The immediate resistance comes at 0.6430.
RBA common questions
The Australian Reserve Bank (RBA) determines interest rates and runs the monetary policy of Australia. Decisions are made by the Council of Governor in 11 meetings per year and allocated emergency meetings as required. The primary mandate in RBA is to maintain the stability of prices, which means an inflation rate of 2-3 %, but also “… to contribute to the stability of the currency, full employment, economic prosperity and the welfare of the Australian people.” Its main performance is by raising or lowering interest rates. The relatively high interest rates will enhance the Australian dollar (AUD) and vice versa. Other RBA tools include quantitative relief and tightening.
While inflation was always believed to be a negative agent of currencies because it reduces the value of money in general, the opposite was already the case in the modern era with the relaxation of capitalist controls across the border. Moderate higher inflation now tends to lead the central banks to set their interest rates, which in turn has an impact on attracting more capital flows from global investors looking for a profitable place to keep their money. This increases the demand for the local currency, which in the case of Australia is the Australian dollar.
The total economy data is healthy and can have an impact on the value of its currency. Investors prefer to invest their capital in safe and growing economies instead unstable and shrink. Increased capital flows increased total demand and local currency value. Classical indicators, such as gross domestic product, PMIS manufacturing, employment services, and consumer morale surveys on AUD. The strong economy may encourage the Australian Reserve Bank to set interest rates, which also supports AUD.
Quantitative mitigation is a tool used in maximum situations when low interest rates are not sufficient to restore credit flow in the economy. QE is the process that the Australian Reserve Bank (AUD) is printed for the purpose of buying assets-usually government or companies-from financial institutions, and thus providing them with the intensity of the need. QE usually leads to the weaker AUD.
The quantitative tightening (QT) is the opposite of QE. It is implemented after QE when the economic recovery is ongoing and inflation begins to rise. While the RBA Reserve Bank (RBA) purchases government bonds and companies from financial institutions to provide them with liquidity, RBA stops buying more assets, and stops re -investing the maturity manager on the bonds that he already holds. It will be positive (or bullish) for the Australian dollar.
Economic indicator
RBA average consumer price index (QOQ)
Consumer Prices Index (CPI), whose chest Australian Statistics Office On a quarterly basis, it measures the changes in the price of a fixed basket of goods and services acquired by families consumers. QOQ reads the prices in the reference quarter in the previous quarter. The broken medium is calculated, which is a measure of basic inflation, as the weighted average for 70 % of the semester change distribution of all components of the consumer price index in order to calm data from the most analyzed components. In general, high reading is seen as bullies of the Australian dollar (AUD), while low reading is seen as declining.
2025-02-18 00:45:00
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