The RBA hiked its policy rate by 25 bps this morning and said that further tightening may be required. The AUD jumped upwards after the rate decision. Economists at Commerzbank analyze Aussie outlook.

RBA not yet done

RBA raised the policy rate again by 25 bps to 4.10% and held out the prospect that ‘some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will depend upon how the economy and inflation evolve’.

This does not sound like an interest rate pause any time soon. Especially as long as inflation remains high, as it recently rose again in April to 6.8% year-on-year.

Now the upcoming data releases on the labour market and inflation will determine whether the AUD will be able to hold its gains. For as long as the RBA remains on a restrictive course, it should remain supported