The Bank of the Australian Reserve (RBA) published the minutes of its monetary policy meeting of April on Tuesday, which showed that the members of the Board agreed that the May meeting would be an appropriate time to reconsider, the decision was not predetermined.
Additional conclusions
- It is not yet possible to determine the time of the next movement in the rates.
- It is not appropriate at this stage that policy reacts to potential risks.
- It is possible that global uncertainty on US tariffs may have a significant impact.
- Global growth risks have increased, are inclined downward.
- The Board saw risks already loss for the Australian economy and inflation.
- It is important to safeguard progress in inflation and not relax “prematurely.”
- The labor market is still considered adjusted, labor costs are too high and productivity is low.
- Possibility that the labor market is not as tight as it was thought, salary growth could continue to slow down.
- The average trimmed inflation probably fell below 3% in the first quarter.
- The data pointed to a genuine improvement in consumer demand, beyond only sales events.
- The Board considered the reduction of bond holdings of the RBA government, no reason to change the rhythm.
- The Governance Board will consider the risks on the scale and maturity of bond holdings.
Market reaction
The Aud/USD jumped to prove 0.6350 after the publication of the RBA minutes. The torque is currently being negotiated at 0.6337, with an increase of 0.84% ​​in the day.
RBA FAQS
The Bank of the Australian Reserve (RBA) sets interest rates and manages Australia’s monetary policy. The decisions are made by a advice of governors in 11 meetings per year and in the necessary emergency meetings that are necessary. The main mandate of the RBA is to maintain price stability, which means an inflation rate of 2%-3%, but also “… contribute to the stability of currency, full employment and economic prosperity and the well-being of the Australian people.” Its main tool to achieve this is to raise or lower interest rates. Relatively high interest rates will strengthen the Australian dollar (AUD) and vice versa. Other RBA tools are the quantitative relaxation and hardening of monetary policy.
Although traditionally it has always been considered that inflation is a negative factor for currencies, since it reduces the value of money in general, the truth is that in modern times the opposite has happened with the relaxation of cross -border capital controls. Moderately high inflation now tends to take the central banks to raise their interest rates, which in turn has the effect of attracting more capital of world investors who are looking for a lucrative place to keep their money. This increases the demand for the local currency, which in the case of Australia is the Australian dollar.
Macroeconomic data calibrates the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in safe and growing economies than in precarious and contraction economies. A greater influx of capital increases aggregate demand and the value of the national currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment and surveys about consumer feeling can influence the AUD. A strong economy can encourage the Bank of the Australian Reserve to raise interest rates, also supporting the Aud.
The quantitative easing (QE) is a tool used in extreme situations in which to lower interest rates is not enough to restore credit flow in the economy. The QE is the process by which the Bank of the Australian Reserve (RBA) prints Australian dollars (AUD) in order to buy assets – normally State or business bonds – to financial institutions, thus providing them with the liquidity they need so much. The one usually translates into a weaker audience.
The quantitative hardening (QT) is the reverse of the QE. It is carried out after the QE, when economic recovery is underway and inflation begins to increase. While in the QE the Bank of the Australian Reserve (RBA) buys state and business bonds from financial institutions to provide liquidity, in QT the RBA stops buying more active and stops reinvesting the main one that expires of the bonds it already has. It would be positive (or bullish) for the Australian dollar.
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.
