As expected, the Reserve Bank of Australia (RBA) kept its official cash rates at 4.35% for a sixth meeting in a row in June.
In its official statement, the RBA recognized that economic and wage growth has weakened, and the unemployment rate has risen since their May meeting.
However, consumption was stronger than expected and labor market conditions have also remained “tighter than is consistent with sustained full employment and inflation at target.”
For now, Governor Bullock and her team remain worried about persistently high inflation staying above their 2% – 3% target range:
“Inflation is easing but has been doing so more slowly than previously expected and it remains high.”
RBA repeated that the path of interest rates “remains uncertain” and that “the Board is not ruling anything in or out” of their discussions.
In her presser, Bullock revealed that the Board did discuss the case for increasing interest rates but eventually decided to stay on its course while keeping close tabs on the increased upside inflation risks and inflation expectations.
Link to RBA Gov. Bullock’s presser
Market Reactions
Australian Dollar vs. Major Currencies: 5-min
Overlay of AUD vs. Major Currencies Chart by TradingView
The Australian dollar traded in tight ranges while traders waited for the RBA’s event.
Not surprisingly, talks of persistently high inflation in the RBA’s statement boosted the Australian dollar as it supported a “higher for longer” interest rate environment if not another interest rate hike.
The risk-related currency then received an extra boost early into Bullock’s presser when she admitted that the board discussed a potential rate hike before deciding to keep its policies steady this month.
The “hawkish hold” event is keeping the Aussie in the green, with most of the gains seen against NZD, JPY, and CAD while seeing limited gains against EUR, CHF, and USD.