The Reserve Bank of Australia (RBA) published the minutes of its April Monetary Policy Meeting on Tuesday, which revealed that the board members agreed that the May meeting would be a suitable time to rethink the meeting, the decision was not pre -determined.
Additional takeaways
- It is not yet possible to determine the time of the next step in rates.
- To react to potential risks is not appropriate at this level for policy.
- It is possible that global uncertainty may have a significant impact on American tariffs.
- Global risks for development had increased, bent on the negative side.
- The board saw the reverse and negative side for the Australian economy and inflation.
- It is important for the protection of progress on inflation and the policy is not to reduce “prematurely”.
- Labor market is still considered tight, labor cost is very high and productivity is low.
- The possibility was not as tight as the labor market was as thought, wage growth could be slow.
- Sorting means that the possibility of inflation fell below 3% in Q1.
- Data pointed to real improvement in consumer demand, just beyond sales incidents.
- The board considered RBA Government Bond Holdings as run down, not seen any reason to change the speed.
- The Board of Governance to consider the risk in the scale and maturity of bond holdings.
Market reaction
After release RBA mines, AUD/USD jumped to test 0.6350. The pair is currently trading at 0.6337, which is 0.84% a day.
RBA FAQ
The Reserve Bank of Australia (RBA) determines interest rates and manages monetary policy for Australia. The decisions are made by a board of governors in 11 meetings in a year and in ad hoc emergency meetings as required. The primary mandate of RBA is to maintain value stability, which means inflation rate of 2-3%, but also that “.. is” .. as the currency, complete employment and the stability of economic prosperity and welfare of the Australians. ” To achieve this, its main tool is to increase or reduce interest rates. The relatively high interest rates will strengthen the Australian dollar (AUD) and vice versa. Other RBA devices include quantitative ease and tightening.
While inflation was always traditionally considered as a negative factor for currencies as it usually reduces the value of money, the opposite has actually been a case with exemption in cross -capital control in modern times. Moderately high inflation now inspires central banks to keep their interest rates, which in turn affects attracting more capital flow from global investors, who are looking for an attractive place to keep their money. This increases the demand for local currency, which is the Australian dollar in the case of Australia.
Macroeconomic data estimates the health of an economy and can affect the value of its currency. Investors prefer to invest their capital in economies that are safe and increased rather than uncertain and shrinking. Greater capital inflow increases the total demand and price of domestic currency. Classic indicators, such as GDP, manufacturing and services can affect PMIS, Employment and Consumer Affairs Survey Aud. A strong economy may encourage the Reserve Bank of Australia to keep interest rates, also support Aud.
Quantitative ease (QE) is a device used in extreme conditions when reducing interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints the Australian dollar (AUD) with the aim of purchasing assets from financial institutions-from financial institutions, giving them very important liquidity. Qi usually results in a weak aud.
Quantitative tightening (QT) is the opposite of Qi. This is done after Qi when an economic reform is going on and inflation starts increasing. Whenever the Reserve Bank of Australia (RBA) buys the government and corporate bonds from financial institutions in Qi, to provide them liquidity, RBA stops buying more assets in QT, and already stops establishing original maturity on those bonds. This will be positive (or accelerate) for Australian dollars.
