AUD Investors Surprised, RBA Acts 'Violently'

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 The Australian Central Bank’s (RBA) policy decision created its own surprise in the Asian session after it decided to raise interest rates by 50 basis points to 0.85%.


This increase was certainly not expected by investors who had previously predicted an increase of only 25 basis points would be implemented by the central bank.


This is also the first consecutive rate hike in 2 years, after policymakers said monetary support was no longer needed amid the strength of the Australian economy and current inflationary pressures.



Governor Philip Lowe said in a statement after the meeting, that the Board expects to take further steps in the process of normalizing monetary policy in Australia in the coming months.


He added that the size and timing of future interest rate hikes would depend on economic data and policymakers' assessments of inflation and labor market projects.


The RBA also reiterated that it was committed to doing what was necessary to keep inflation back on target as well as paying attention to global growth prospects, which continue to be obscured by the war in Ukraine and its impact on energy and commodity prices.


As an initial reaction to the decision, the Aussie dollar surged higher before returning to cut gains as it was limited by the strengthening US dollar.

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