RBA Holds Rates at 4.35%, Pauses to Assess Impact of Hikes

The Reserve Bank of Australia (RBA) held its cash rate at 4.35% as expected, but the decision was more about assessing the impact of previous hikes rather than declaring victory over inflation. The RBA has been tightening monetary policy since February, and while inflation remains elevated, consumer spending, housing, and labor market conditions are beginning to cool. This pause in rates is not a dovish pivot, but rather a sign that the Bank believes tighter policy is starting to have an effect. If inflation remains sticky or global energy risks keep price pressures high, another hike remains on the table. The AUD/USD pair is currently testing the 0.704-0.708 resistance area and will be influenced by the US CPI release tomorrow, which could impact its ability to break higher. A hotter print would make it harder for the pair to break above 0.708, while a cooler print would give it more room to move upwards. The RBA's decision has been viewed as hawkish, but some experts argue that a hawkish central bank is not always enough to boost a currency. The RBNZ, which raised its OCR to 2.50% in July, remains at an earlier stage of its tightening cycle, and the timing gap between Australia and New Zealand's monetary policy decisions could impact their relative rate advantage.