In the RBA minutes, it was noted that inflation in Australia remained high, and the tight labor market indicated the potential for above-average increases in prices and wages. Despite this, the board decided to hold the cash rate unchanged at 4.1 percent, considering the significant tightening of monetary policy that had already taken place and the uncertainty surrounding the economic outlook. The board acknowledged the need for further tightening in the future to bring inflation back to target but would reassess the situation at the August meeting based on additional data and updated forecasts. The RBA remains committed to returning inflation to target within a reasonable timeframe.
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Two options discussed: increasing the cash rate by a further 25 basis points or holding it unchanged.
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Holding the cash rate unchanged was favored due to recent tightening, restrictive stance, and inverted yield curve.
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Uncertainty surrounding the outlook and effects of prior tightening warranted reassessment at the August meeting.
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Australian economic growth slowed, reflecting the impact of higher interest rates and high inflation.
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Labor market conditions remained tight, with robust employment growth and low spare capacity.
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Inflation remained high, although it had eased from its peak. Timely indicators suggested a gradual easing in inflation. Services price inflation remained high, reflecting strong growth in unit labor costs.
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Market expectations for future rate hikes increased.
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China's economic recovery lost momentum, with weaker economic indicators and a further weakening of the property market.
The AUDUSD experienced mixed movement in response to the RBA meeting minutes. Prior to the release, the pair initially rose to a high of $0.683 but then fell to a pre-minutes low of $0.680. Currently, the AUDUSD is up 0.14% at $0.682. The pair faces resistance at $0.689, while support is expected at the major retracement level of 0.679 cents. The RBA's cautious tone and mention of possible future tightening to control inflation could influence market sentiment towards the Australian dollar.
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