The Australian Dollar and the RBA: Dirty Deeds Don’t Come Cheap
The Australian Dollar and the RBA: Dirty Deeds Don?t Come Cheap
Despite the fact that the Australian Dollar (AUD) has been on a downward trend since the middle of last year, the Aussie is still performing well on a domestic basis. The RBA is expected to raise interest rates by 25 bps at their next meeting, which should support the AUD against the US Dollar. The RBA has also stated that it is ready to intervene in the foreign exchange market if needed, which should help the Australian dollar stay strong against other currencies.
The Reserve Bank of Australia, or RBA, is a central bank that is mainly responsible for monetary policy and the issue and management of the Australian Dollar. It was established by a government decree in 1960 and is entirely owned by the Australian government.
It has three mandates: to provide a stable currency; to ensure full employment; and to contribute to economic growth. It does this by managing the country?s money supply and influencing the price of goods and services.
In the past, the RBA has been known to tinker with the interest rate target by setting different tenors for the cash rate. This is often done in response to market dysfunction or economic weakness.
During the energy recession, the value of the AUD plummeted as iron ore and coal prices fell. The RBA has been working to get the Australian economy out of the slump.
But if the RBA continues to raise rates, they may smother inflation and reduce the level of demand. This will slow down the economy and could create a drag on productivity gains, which might lead to a longer-term decline in living standards.
The Australian economy is a mixed one, which relies on the service industry. It is the 13th largest national economy by nominal GDP, with the services sector accounting for 63 percent of the total.
It is estimated that the economy has grown by 2.8% annually over the past three years. This is the lowest growth rate in Australia in more than a decade, according to the National Bureau of Statistics.
However, the Australian economy has exhibited strength since the middle of 2018, with unemployment falling to 5.5% and average weekly wage growth rising by 1.9%. This suggests that the economy is slowly recovering from the low point it suffered during the oil crash in 2015, which caused a devaluation of the AUD.
Another sign of the strength of the Australian economy is the recent increase in inflation. This has pushed the Reserve Bank of Australia?s (RBA) interest rate target to 3.10%.
The RBA raised its cash rate target by 25 bps at their latest meeting, bringing the total number of rate hikes this cycle to 300 bps. This is a significant increase in the rate hike cycle for the RBA, which has previously stayed within a tight range of 2% to 3%.
