FX: The Reserve Bank of Australia has suspended interest rate hikes again!

Tuesday.Reserve Bank of Australia pauses rate hikes for second time in a row, keeping base rate at 4.1%At the same time, the door is open to future interest rate hikes, and the market had expected it to continue to raise interest rates by 25 basis points.

After the resolution was announced,Australian dollar to US dollarShort-term decline of nearly 40 pointsThe interest-rate-sensitive three-year Treasury yield fell to 3.82%.

The second consecutive pause in interest rate hikes suggests the Reserve Bank of Australia may be nearing the end of its tightening cycle.Compared with the Federal Reserve, the Reserve Bank of Australia has a more supportive policy stancecautious。

Reserve Bank of Australia President Lowe reiterated,The suspension of interest rate hikes is to provide more time to evaluate the impact of the hikes in interest rates so far and the economic outlook.

"High interest rates help create a more sustainable balance between supply and demand in the economy, and the RBA will continue to do so, and overall consumption growth has slowed considerably due to cost of living pressures and higher interest rates." 

The Federal Reserve raised interest rates by 25 basis points last week, bringing its cumulative rate hike to 525 basis points, much higher than the Reserve Bank of Australia's 400 basis points. This reflects to some extentThe Reserve Bank of Australia's interest rate hike has been quickly transmitted to the country's borrowersThese borrowers are primarily on floating-rate mortgages, while the majority of Americans are on 30-year fixed-rate mortgages.

To policymakers' relief, headline inflation slowed more than expected in the second quarter, with the CPI still up 6 per cent from a year earlier, well above the RBA's 2 per cent target but below Quarter 1 7 per cent. 

In addition, interest rate hikes are playing a role in slowing consumer spending, with retail sales falling by the most this year in June. 

The Reserve Bank of Australia essentially kept its economic forecast for the previous quarter unchanged.Overall inflation is forecast to slow to around 3.25% by the end of 2024 and return to the target range of 2-3% by the end of 2025.

The Reserve Bank of Australia also said that while companies have reported that labor shortages have eased,Job vacancies and advertising demand remain high。

With economic and job growth expected to be below trend, the Reserve Bank of Australia expectsThe unemployment rate will gradually rise from the current 3.5% to around 4.5% by the end of next yearWage growth has accelerated due to tight labour markets and high inflation. Overall, wage growth remains in line with inflation targets as long as productivity growth picks up