The Australian Central Bank’s (RBA) policy announcement surprised investors in the Asian session after it ended its bond yield target for April 2024 of 0.1% and kept interest rates at a low of 0.10%.
As a result, the AUD/USD pair plunged around 50 pips, bringing the Aussie dollar back below the 0.7500 price level against the US dollar.
In addition, the RBA also changed its previous statement that interest rate hikes will not happen until 2024. On the other hand, rates will not be raised until real inflation continues to rise in the 2%-3%target range.
This indirectly reflects improved economic growth and concerns over the recent shocking inflation readings.
The central bank forecasts economic growth of 3% in 2021 and 5.5% and 2.5% for the next two years.
This requires a strong labor market to generate growth in wages that is materially higher than current levels.
Meanwhile, the RBA also set Australia’s inflation forecast to be no more than 2.5% by the end of 2023 and predicted only a gradual increase in wage growth.
However, there are uncertainties in the field of health that are likely to continue to show weakness. Covid-19-induced coronavirus closure has recently caused working hours in Australia to fall sharply, but recovery is now underway.
