RBA leaves cash rate unchanged at 4.35%, as expected

• Prior 4.35%
• Latest data does not change previous assessment that policy is restrictive and working as anticipated
• The outlook remains highly uncertain
• Inflation is still some way above the midpoint of the 2% to 3% target range
• Returning inflation to target is the priority
• Underlying inflation remains too high
• Policy will need to be sufficiently restrictive until confidence returns that inflation is moving sustainably towards the target range
• RBA remains resolute in its determination to return inflation to target and will do what is necessary to achieve that outcome
• The most recent projections in the August SMP show that it will be some time yet before inflation is sustainably in the target range
• Data since then have reinforced the need to remain vigilant to upside risks to inflation
• RBA is not ruling anything in or out on next policy steps
• Full statement

They added just one passage to the to the guidance communique, that being:

“The most recent projections in the August SMP show that it will be some time yet before inflation is sustainably in the target range.”

In other words, they might just have to keep rates higher for longer as it would seem. The market pricing towards year-end hasn’t changed all too much though. Traders were seeing ~16 bps of rate cuts by year-end previously but are now seeing ~14 bps now.

The overall language is largely kept from August and just continues to place heavy emphasis that the inflation battle is not over yet. And given that, the RBA is not ready to lower the cash rate as such.

AUD/USD nudges up just a little from 0.6848 to 0.6858 currently. The pair is continuing to trade at its highest levels for the year with eyes on the December 2023 high of 0.6871 now.

This article was written by Justin Low at www.forexlive.com.