- The Australian Reserve Bank is expected to keep the rates unchanged in March.
- The comments of the Governor of the RBA, Michele Bullock, could trigger some market reactions.
- The Australian dollar is weak before the ad in the midst of the reigning risk aversion.
The Bank of the Australian Reserve (RBA) is holding its monetary policy meeting and will announce its decision early on Tuesday. The RBA is expected to maintain the official cash (OCR) rate in 4.10% after the rate cut in February.
At that time, the Central Bank announced a cut of 25 basic points (BPS), the first since the late 2020. The new decision will be announced at 03:30 GMT, and the press conference of Governor Michele Bullock will continue at 04:30 GMT.
RBA will keep governor Bullock on the track of the interest rate
The RBA had maintained the OCR at maximum of several years for longer than any other central bank, however, lukewarm economic growth affected those responsible for politics, who finally acted in February.
“The assessment of the Board is that monetary policy has been restrictive and will continue to be after this reduction in the cash rate. Some of the upward risks for inflation seem to have decreased and there are signs that disinflation could be happening a little faster than expected above. However, there are risks on both sides,” says the February statement.
Even more, those responsible for the policy added: “The forecasts published today suggest that, if monetary policy is loosen too soon, disinflation could stagnate and inflation would be established above the midpoint of the target range. By eliminating some of the restrictivity of politics in its decision today, the Board recognizes that it has advanced, but it is cautious about perspectives.”
Subtle, officials suggested that they would have a cautious approach to interest rate cuts. With that in mind, market participants anticipated that there would be no movements in March, also considering that the Gross Domestic Product (GDP) of the first quarter will not be published until the end of April. It is likely that those responsible for the policy wait for the update of the growth and additional data of inflation before deciding the next movement.
It is worth remembering that the Australian economy grew 1.3% in the last quarter of 2024, slightly better than 1.2% anticipated by market participants. Exports supported generalized growth, which, anyway, was considered “modest” by the Australian Statistics Office (ABS).
Meanwhile, general inflation fell to a minimum of three years of 2.4% in the three months until December, according to the data of the Consumer Price Index (CPI), while the underlying inflation was reduced to a minimum of three years of 3.2%. The figures provided the RBA to make a rate cut. Even so, the next quarterly inflation report will leave in approximately one month, giving those responsible for the RBA policy another reason to delay the modification of the rates until May.
Without expected changes in the OCR, the attention will focus on the words of Governor Michele Bullock and any clue he can offer about the future of monetary policy. While the Board argued whether to make rates cuts or not, this would give an idea how worried are the officials. The more moderate the perspective, the more possibilities there will be a cut of interest rates in the predictable future.
How will the decision of the Bank of the Australian Reserve in the Aud/USD impact?
Before the announcement, the Australian dollar (AUD) is under a strong selling pressure, with the Aud/USD torque approaching the 0.6200 mark and quoting at its lowest level since March 4. The ongoing fall has little to do with Australia and is purely linked to market panic in the midst of US tariffs (USA). President Donald Trump is ready to launch his “Liberation Day,” that is, massive reciprocal tariffs on Wednesday, while threatening to add more levies to US imports. Financial markets fear that this affects global growth.
Valeria Bednarik, chief analyst of FXSTERET, points out: “The aud/USD torque is bassist before the announcement, and the probabilities that the RBA can trigger a recovery seem limited. The anticipated decision of maintaining the rates, the most likely result, and the fact that the Board will expect more data, anticipate that the decision could be an event. overshadowing macroeconomic ads. “
“In fact, a surprise announcement, such as an unexpected cut or increased rates, could result in extreme volatility around the aud/usd,” Bednarik adds, although he clarifies that both are quite unlikely scenarios.
Finally, Bednarik points out: “From a technical point of view, the risk leans down, since the daily graphic of the aud/USD shows that it develops below all its mobile socks, while the downward impulse remains strong. Below the mark of 0.6200, the following relevant support is the monthly minimum of March in 0.6186, followed by the price zone of 0.6130. On the other hand, it is around 0.6300, followed by the recent recent in the 0.6330 region. “
Faqs Australian dollar
One of the most important factors for the Australian dollar (Aud) is the level of interest rates set by the Australian Reserve Bank (RBA). Since Australia is a country rich in resources, another key factor is the price of its greatest export, iron mineral. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and commercial balance. The feeling of the market, that is, if investors are committed to more risky assets (Risk-on) or seek safe shelters (Risk-Off), it is also a factor, being the positive risk-on for the AUD.
The Australian Reserve Bank (RBA) influences the Australian dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of the interest rates of the economy as a whole. The main objective of the RBA is to maintain a stable inflation rate of 2% -3% by adjusting the interest rates or the low. Relatively high interest rates compared to other large central banks support the AU, and the opposite for the relatively low. The RBA can also use relaxation and quantitative hardening to influence credit conditions, being the first refusal for the AU and the second positive for the AUD.
China is Australia’s largest commercial partner, so the health of the Chinese economy greatly influences the value of the Australian dollar (Aud). When the Chinese economy goes well, it buys more raw materials, goods and services in Australia, which increases the demand of the AU and makes its value upload. The opposite occurs when the Chinese economy does not grow as fast as expected. Therefore, positive or negative surprises in Chinese growth data usually have a direct impact on the Australian dollar.
Iron mineral is the largest export in Australia, with 118,000 million dollars a year according to data from 2021, China being its main destination. The price of iron ore, therefore, can be a driver of the Australian dollar. Usually, if the price of iron ore rises, the Aud also does, since the aggregate demand of the currency increases. The opposite occurs when the price of low iron ore. The highest prices of the iron mineral also tend to lead to a greater probability of a positive commercial balance for Australia, which is also positive for the AUD.
The commercial balance, which is the difference between what a country earns with its exports and what it pays for its imports, is another factor that can influence the value of the Australian dollar. If Australia produces highly requested exports, its currency will gain value exclusively for the excess demand created by foreign buyers who wish to acquire their exports to what you spend on buying imports. Therefore, a positive net trade balance strengthens the AUD, with the opposite effect if the commercial balance is negative.
Economic indicator
RBA interest rate decision
He Australian Reserve Bank (RBA) announces your decision on interest rates at the end of your eight meetings scheduled per year. If the RBA adopts a hard line posture on the inflationary perspectives of the economy and uploads interest rates, it is usually bullish for the Australian dollar (Aud). Similarly, if the RBA has a moderate vision of the Australian economy and maintains interest rates without changes, or reduces them, it is considered bassist for the AUD.
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Next publication:
ABR 01, 2025 03:30
Frequency:
Irregular
Dear:
4.1%
Previous:
4.1%
Fountain:
Reserve Bank of Australia
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
