Australia is in no rush to raise rates and is waiting for higher inflation

Reserve Bank of Australia kept the interest rate at a record low of 0,1 percent. for the fourteenth month in a row, according to the decision made during the meeting in January 2022. It was in line with market expectations and consensus.

Policymakers decided to end the bond purchase program worth AU $ 275bn, and the last purchases will take place on February 10.

The Reserve Bank of Australia is waiting for higher inflation

The bank's council emphasized, however, that the suspension of quantitative easing does not mean an interest rate hike in the near future, as the central bank is still ready to remain patient.

The Council will not raise interest rates until inflation is in the range of 2-3%. Inflation has risen, but it is too early to say that it is persistently in the target range, the central bank added in a statement to the decision.

The committee mentioned that wage growth in Australia remains modest and that it will probably take some time to move at a pace in line with inflation. The bank reiterated that the coronavirus omicron mutation is unlikely to derail the economic recovery.

USD gives back profits?

AUD / USD exchange rate seems to be defending once again the potential support level at 0,7000. Thus, a pattern that resembles a double bottom may form, as the AUD / USD pair also tested this level at the beginning of December.

The US dollar seems to reflect past potential gains and is weakening against the major currencies. In March Federal Reserve may raise US interest rates by 50 basis points. It would be the first such move since 2000, and this year there could be five increases in total. It seems, therefore, that the USD would need new arguments for further appreciation, because the current ones may resemble the implementation of a well-known proverb - buy rumors, sell facts.