Australia Holds Rate Before US Election

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Post on Nov 08, 2024

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Aussie Rates Stay Steady Ahead of US Election Drama

The Reserve Bank of Australia (RBA) held its official cash rate steady at 3.25% this week, giving Aussie businesses and consumers a breather before the US election drama unfolds. The decision was expected, with most economists predicting a pause as the RBA carefully watches how rising inflation and interest rates are impacting the Aussie economy.

No Change, But Not Out of the Woods

While the RBA held the rate steady, the minutes from the meeting were clear: the fight against inflation isn't over yet. The RBA remains concerned about the "persistence" of high inflation, and emphasized that "further tightening of monetary policy may be required" to bring it back to target. So, while a rate hike was off the table this time, the RBA is keeping its powder dry for future meetings.

Keeping an Eye on the US

The RBA's decision to hold rates comes as the US Federal Reserve is also grappling with a tough decision. With the US presidential election looming, the Fed is facing pressure to either raise rates to fight inflation or hold steady to avoid rocking the boat before the vote. The RBA is likely watching the Fed's moves closely, as US monetary policy can have a big impact on the Aussie dollar and global financial markets.

Aussie Economy Holding Strong

Despite the looming economic headwinds, the Australian economy is showing some signs of resilience. Job growth is still strong, consumer spending is holding up, and the housing market has stabilized. However, inflation remains stubbornly high, putting pressure on businesses and households.

What's Next for Aussie Rates?

The next meeting of the RBA is scheduled for November, and the decision on rates will be heavily influenced by economic data and developments in the US. If inflation shows signs of cooling down, the RBA might be able to hold rates for longer. But if the economic outlook deteriorates, further rate hikes could be on the cards.

Bottom Line:

The RBA is taking a cautious approach to interest rates, holding them steady for now but signaling that further hikes could be needed in the future. The focus is now shifting to the US election and its potential impact on global financial markets. Aussie businesses and consumers will be watching closely to see how the RBA reacts to these developments.