The Australian dollar and stocks fell after the RBA indicated more interest rates rises, with Governor Lowe to speak on Thursday.
after the Reserve Bank said it would continue to raise the cash rate, but economists and markets are divided on the pace and size of future increases.
In its policy statement, the central bank dropped a reference to each increase as a step in the normalisation of monetary conditions. “The RBA has signaled in the past the neutral rate is 2.50 per cent, so close to where we are now. The next couple of meetings and likely hikes will push policy settings into ‘restrictive’ territory,” Mr Rundell said.
The Australian dollar slipped 0.2 per cent to US67.86¢, pulling closer to a seven-week low of US67.71¢ touched last week. “This is broadly consistent with a tapering of the hike pace and entry into extended pause over the next few meetings,” said Ben Jarman, chief economist at JPMorgan. He anticipates a 0.5 per cent point lift in October, to be followed by a smaller 0.25 per cent increase in November before an “extended pause.”
“But the language around the priority of inflation, labour markets and wages does not seem consistent with an imminent pause,” he said. “The better approach, now that neutral has been reached, is to maintain the emphasis on inflation being the central commitment while backing that up by continuing to tighten policy.”
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