The Australian Central Bank (RBA) kept its monetary policy unchanged at a meeting today, setting aside pressure to follow in the footsteps of the Federal Reserve (Fed).
The RBA set interest rates to remain at a low of 0.1%, saying accommodative policies were still needed to restore labor market stability to drive higher wage growth.
Moreover, the central bank also reiterated its stance that it will not raise rates until inflation is at the central bank’s 2-3% target, which it is seen as unlikely to achieve within 2 years.
The RBA decision reflects policymakers are still wary of the current recovery amid the latest threat from the Omicron variant as the Australian economy has just bounced back from previous sanctions.
Even so, the initial reaction exhibited by the Aussie dollar was the opposite, seeing the antipodean currency rally higher in the Asian session.
The increase may be driven by the central bank’s optimistic statements about the current economy, where consumer spending is seen rebounding stronger and the prospects for business investment have also improved.
The RBA also said the economy is expected to return to pre-pandemic levels in the first half of 2022 as key indicators show a strong recovery in the labor market.
This statement is seen as an indication that bond purchases will be reduced or end next February.
