The Reserve Bank of Australia increased its benchmark rate by 25 basis points to 4.1% on Tuesday, defying market expectations

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While Philip Lowe, Governor of the Reserve Bank of Australia, acknowledges that the nation’s inflation may have “passed its peak,” he maintains that there is still evidence that it is continuing.

“Recent data indicate that the upward risks to the inflation outlook have increased,” claims Lowe, “and the Board has taken action to address this.”

Lowe has stated that to increase confidence in achieving the inflation target in a reasonable period. There will be further increases in interest rates.

The central bank’s target inflation rate is between 2% and 3%.

Because high inflation has been ingrained in people’s expectations, Lowe warned that lowering it later would be prohibitively expensive, implying even higher interest rates and a more significant increase in unemployment.

The governor stated that additional rate hikes may be required to lower the country’s inflation rate, but their implementation will be influenced by the economy’s performance and the trajectory of inflation.

“Some more monetary policy tightening may be required… to guarantee that inflation returns to goal in a fair amount of time… According to Lowe, the Board will continue to keep a close eye on global economic changes, consumer spending trends, and inflation and GDP estimates.

A winding road leads to a magnificent landing.

The Australian economy’s task of avoiding a recession was once again highlighted as a challenging one by the central bank.

The board issued a statement that read, “The Board is still seeking to maintain the economy on a steady keel as inflation returns to the 2-3 percent target range.” But the road to a gentle landing is still a short one.

According to Paul Bloxham of HSBC, the RBA’s goal of completing its rate hike cycle without sending the economy into a recession is becoming more challenging to accomplish.

AUD/USD Long (Buy)
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T.P_2: 0.68710
S.L: 0.65291

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