The Australian Dollar (AUD) has weakened following the RBA’s latest policy meeting. Economists at MUFG Bank analyze Aussie’s outlook.
RBA to begin cutting rates during the second half of this year
The Reserve Bank of Australia (RBA) has maintained its policy rate at 4.35% for the third consecutive meeting. However, in their updated policy statement, the RBA has softened their stance regarding the likelihood of further rate hikes.
The revised guidance from the RBA has increased our confidence that the central bank has reached the conclusion of its rate hike cycle, although the possibility of one final increase cannot be entirely dismissed.
We anticipate the RBA to commence rate cuts during the latter half of this year. Unlike other major central banks such as the Federal Reserve, the RBA is expected to take a more gradual approach to lowering rates.
Conversely, one negative development for the Australian Dollar has been the recent sharp decline in iron ore prices, which have continued to plummet this month. Since reaching its peak earlier this year, the price of iron ore has dropped by nearly 30%, presenting ongoing downside risks for the Australian Dollar in the short term.
