RBA Governor Says No Rate Hike Talks – AUD/USD Slides as Rate Hike Talk Cools

Key takeaways from the RBA Rate Statement included,

• Inflation has fallen substantially since the peak in 2022 but remains above the midpoint of the 2-3% target range.
• Inflation is expected to temporarily decline in July, but forecasts indicate it will not return sustainably to target until 2026.
• Declines in real disposable incomes and the effects of restrictive financial conditions continue to weigh on consumption.
• However, growth in aggregate consumer demand has shown resilience.
• Broader indicators suggest labor market conditions remain tight.
• Wage pressures have eased somewhat but labor productivity remains at 2016 levels, despite the pickup over the past year.
• A sharp deterioration in labor market conditions could affect expectations of a pickup in household consumption growth.
• Underlying inflation remains too high, requiring the Board to remain vigilant to upside inflation risks.
• The Board is not ruling anything out and will continue to rely on data and ongoing assessment of risks to guide its decisions.
• Focal points will include developments in the global economy and financial markets, trends in domestic demand, and the outlook for inflation and the labor market.

Expert Views on the RBA Rate Statement David Scutt, Market Analyst at Stone X, commented on the RBA Rate Statement, stating,

“The way I see it, until the RBA sees two consecutive quarterly CPI reports with trimmed mean sub-0.8% (which means Jan 2025 at the earliest), it will only be a sharp rise in unemployment or global crisis that will see it cut rates this year.”

AUD/USD Reaction to the RBA Statements and Press Conference Before the RBA Rate Statement and subsequent press conference, the AUD/USD dipped to a low of $0.68256 before climbing to a pre-statement high of $0.68552.

Following the RBA Rate Statement, the AUD/USD rallied from $0.68478 to a pre-press conference high of $0.68678.

In response to the RBA press conference, the AUD/USD tumbled from $0.68691 to a low of $0.68230. The AUD/USD responded to RBA Governor Bullock, who said there were no discussions about rate hikes.