Prior to the April 23 release of the Australian consumer price index (CPI)
data, it had been widely expected that the Reserve Bank of Australia (RBA) would hike rates at its May 1 central bank meeting. However, underscoring how perceptions within the financial arena can shift on a dime, better-thanexpected inflation numbers dashed hopes of another rate hike; bond prices surged that day, while the Aussie dollar fell.
As widely expected among economists and market players, the RBA left its cash rate steady at 6.25 percent at its May 1 meeting. Looking at the recent
inflation numbers compelling the RBA’s steady stance, CPI rose 0.1 percent in the first quarter and 2.4 percent year-over-year. That compares to pre-report expectations of a 0.6-percent jump in the first quarter and a 3.1-percent year-over-year reading.
The latest inflation report nudged the CPI back within the RBA’s target range of 2 to 3 percent. Another factor for currency traders is the fact that Australia has moved into what market watchers call the “election window,” which makes shifts in monetary policy unlikely in coming months. The next general election for Parliament of Australia is expected to be called for later this year, and must occur ahead of Jan. 19, 2008.
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