AUDJPY has the potential for a correction with an RBA rate meeting ahead.
AUDJPY – Daily Chart
AUD/JPY broke through the 93 level recently and is currently consolidating. There is potential for the forex pair to pull back to support with hawkish RBA sentiment.
ABC veteran finance expert Alan Kohler is begging the Reserve Bank to halt its aggressive interest rate hike strategy, saying inflation was flat in May. While consumer prices rose by 5.6% year-on-year, the monthly indicator showed zero change. From January to May, the monthly average was 0.24% using figures from the Australian Bureau of Statistics.
“So memo the Reserve Bank: the most recent inflation rate in Australia is zero,” Kohler said on ABC News. He later tweeted for the rate hike strategy to stop, saying the RBA “must stop hiking rates”. Despite the slowdown in inflation, the RBA raised rates in June for the 12th time since last May 2022 and interest rates are now at 4.1%.
“Without the seasonal adjustment, hocus-pocus that the ABS wizards do, the original consumer price index in May actually fell,” Kohler said.
The Commonwealth Bank, Australia’s largest mortgage lender, is expecting a rate pause. The bank’s Senior economist Belinda Allen said that lower inflation in May could affect the bank’s decision this week.
“The lower-than-expected monthly CPI print for May has, in our view, tilted the balance of risks to an on-hold decision in July,” she said.
The Australian Treasury is now expecting the economy to slow to a GDP of 1.5% in 2023-24, as a result of the rate hike strategy, down from 3.25%. AMP has warned that every rate hike is threatening a recession, repeating the scenario of 1991 when the RBA’s cash rate hit 18% in 1989. But Treasurer Jim Chalmers downplayed the risk of a recession from the rate hikes.
“The Treasury forecasts and the Reserve Bank forecasts are for continued growth in the Australian economy,” Chalmers said.
“We’ve been really upfront with people for some time and said that we do expect the Australian economy to slow considerably, as the inevitable consequence of interest rates which started going up before the election, combined with very difficult global conditions.”
