The RBA Maintains the Cash Rate at 4.10% and Considers Additional Rate Increases

Main points:

• Today, the RBA decided to keep the cash rate steady at 4.10%.
• Committee members emphasized concerns regarding household expenditure and the state of the Chinese economy.
• In the future, the RBA will prioritize the worldwide economy, household expenditure, inflation, and labor market patterns.  

RBA's Decision on Interest Rates  

The Reserve Bank of Australia (RBA) decided to maintain the cash rate at 4.10% today, in line with economists' expectations. This decision shifted investor attention to the RBA Rate Statement.

Key points from the Rate Statement are as follows:

• The Board anticipates that higher interest rates will continue to contribute to a more sustainable balance between supply and demand.
• Uncertainties regarding the broader economic outlook and the rebalancing of supply and demand led the Board to keep the cash rate unchanged.
• While past its peak, Australian inflation remains elevated.
• Inflation in the service sector and fuel prices are keeping overall inflation levels high.
• Below-trend growth in the Australian economy is being affected by high inflation's impact on real household incomes.
• Persistent service price inflation abroad may have a similar effect in Australia.
• The outlook for household consumption is uncertain.
• Global concerns, particularly related to the Chinese economy, are adding to the uncertain economic outlook.
• Any further tightening of policy will depend on incoming data and the assessment of risks.
• The Board will closely monitor the global economy, domestic household spending trends, inflation, and the labor market.
• While the RBA refrained from indicating additional rate hikes, the Rate Statement supported expectations for a prolonged period of higher interest rates to achieve the inflation target.  

The Response of AUD/USD to the RBA Interest Rate Decision and Rate Statement  

Prior to the RBA's interest rate decision, the AUD/USD climbed to a peak of $0.63671 before decreasing to a minimum of $0.63397. Nevertheless, following the RBA's decision and Rate Statement, the Australian Dollar dropped to a low of $0.63362 before rebounding to a post-Rate Statement high of $0.63508.

As of this morning, the AUD/USD had declined by 0.21% to $0.63500.  

Coming up

Later today, all eyes will be on the US labor market as the impactful US JOLTs Job Openings Report captures investor attention. A rise in job openings would signify a constrained labor market and bolster the Fed's assertive interest rate trajectory.

Economists anticipate job openings to edge up from 8.827 million to 8.830 million in August. Nonetheless, investors should also factor in the commentary from FOMC members. An increase in job openings coupled with hawkish Fed remarks could drive another surge in US Treasury yields, potentially at the cost of riskier assets.