Australian Treasurer Chalmers: RBA hold not the result market was expecting

Source Fxstreet

Australian Treasurer Jim Chalmers said on Tuesday that the Reserve Bank of Australia (RBA) hold is not the result millions of Australians were hoping for or what the market was expecting. 

Chalmers further stated that the Australian central bank has indicated the direction of travel on inflation and interest rates has been established. 

Market reaction

At the time of writing, the AUD/USD pair is trading 0.85% higher on the day to trade at 0.6546.

RBA FAQs

The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.

While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.

Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.

Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.

Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
placeholder
Bitcoin Cash Price Prediction: BCH hits $600, the highest level in 2025Bitcoin Cash (BCH) consolidates near $590 at the time of writing on Monday, after reaching its highest yearly level of above $600 the previous day.
Author  FXStreet
Jul 28, Mon
Bitcoin Cash (BCH) consolidates near $590 at the time of writing on Monday, after reaching its highest yearly level of above $600 the previous day.
placeholder
USD/JPY Price Forecast: Rising 20-day EMA suggests a strong upside trendThe USD/JPY pair ticks down to near 148.35 during the late Asian trading session on Tuesday, struggling to extend its three-day winning streak.
Author  FXStreet
Jul 29, Tue
The USD/JPY pair ticks down to near 148.35 during the late Asian trading session on Tuesday, struggling to extend its three-day winning streak.
placeholder
Gold price consolidates in $3,320-3,330 band; looks to Fed for meaningful impetusGold price (XAU/USD) seesaws between tepid gains/minor losses during the Asian session on Wednesday.
Author  FXStreet
23 hours ago
Gold price (XAU/USD) seesaws between tepid gains/minor losses during the Asian session on Wednesday.
placeholder
On-chain data showed that whales are aggressively accumulating more Bitcoin and EthereumOn-chain data showed that whales are aggressively accumulating more Bitcoin and Ethereum.
Author  Cryptopolitan
23 hours ago
On-chain data showed that whales are aggressively accumulating more Bitcoin and Ethereum.
placeholder
Strategy Unveils $2.46 Billion Bitcoin Buy, Biggest Purchase In 8 MonthsStrategy has just added to its Bitcoin buying spree with a multi-billion dollar purchase, its largest buy since November of last year. Strategy Has Bought Another 21,021 Bitcoin As announced by Strategy Chairman Michael Saylor in an X post, the company has completed a fresh Bitcoin acquisition. With this buy, Strategy has added 21,021 BTC […]
Author  Bitcoinist
3 hours ago
Strategy has just added to its Bitcoin buying spree with a multi-billion dollar purchase, its largest buy since November of last year. Strategy Has Bought Another 21,021 Bitcoin As announced by Strategy Chairman Michael Saylor in an X post, the company has completed a fresh Bitcoin acquisition. With this buy, Strategy has added 21,021 BTC […]
goTop
quote