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RBA Holds Interest Rates Amid Expectations Of Future Cuts

The Reserve Bank Of Australia (RBA) Recently Holds Interest Rates Steady At 4.35%. This Move Aligns With Expectations, As Recent Data Indicates That While Inflation Is Cooling, Underlying Price Pressures Remain. Although Headline Inflation Now Falls Within The RBA's 2% To 3% Target Range, Core Inflation, Which Excludes Volatile Factors Like Food And Fuel, Continues To Be Stubbornly High. Consequently, The RBA’s Focus Has Shifted To The Timing Of Potential Rate Cuts, Which May Not Occur Until Inflation Sustainably Falls Within Target.

Why The RBA Is Waiting To Cut Rates

Despite Softening Inflation, The RBA Remains Cautious. RBA Governor Michele Bullock Has Emphasized That Inflation Remains Too High To Justify Immediate Cuts. The Bank Expects Inflation To Stabilize Only Within The Next Two Years, Which Suggests That Any Rate Cuts Will Likely Be Postponed Until 2025. Additionally, Australia’s Labor Market Shows Resilience, Further Reinforcing The Decision To Hold Rates Steady. Bullock’s Stance Is Supported By Westpac Chief Economist Luci Ellis, Who Anticipates That The RBA Will Only Begin Cutting Rates From February 2025.

Market Reactions: ASX 200 And AUD/USD Forecasts

Australia's Stock Market, Represented By The ASX 200, Has Experienced Volatility Due To Shifts In Interest Rate Expectations. In October, The ASX 200 Reached Record Highs As Global Central Banks Moved Towards Easing. However, Any Hint Of Hawkishness From The RBA Could Temper These Gains, With Traders Closely Watching For Signals.

Similarly, The Australian Dollar (AUD) Has Been Impacted By The RBA’s Stance. AUD/USD Has Weakened Due To Anticipation Of Rate Cuts, Reaching Near Three-month Lows In October. A Dovish RBA Policy Could Lead To A Weaker AUD, Though The Currency May Find Support If Rate Cuts Are Delayed.

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