The Australian dollar retreated on Tuesday after the country’s central bank hiked interest rates as many had expected, but sounded non-committal on whether even tighter policy would be necessary. The Reserve Bank of Australia (RBA) lifted its cash rate by 25 basis points to 4.35%, ending four months of pauses and taking rates to their highest since late 2011. Yet the central bank also softened its previous position that “some” further tightening may be needed, instead saying “whether” a move would be necessary would depend on incoming data.
“There are good reasons to suspect today’s hike will be the last in the RBA’s current hiking cycle,” said Abhijit Surya, an economist at Capital Economics. “It’s clear that RBA remains concerned about potential overtightening, noting that weak consumption growth and dwellings investment were likely to contribute to below-trend growth.”