ING: Reserve Bank of Australia signals a pause in rate hikes but remains ready to act; AUD decline may be only a short-term phenomenon

Golden Ten Data reported on May 6 that ING analysis indicates the Reserve Bank of Australia raised its cash rate by 25 basis points to 4.35% with an 8-1 vote on Tuesday, showing a more decisive stance compared to the previous divided meeting. The Reserve Bank of Australia downgraded its 2026 GDP growth forecast by 0.5 percentage points to 1.3% and stated that the unemployment rate is expected to rise to 4.6% by the end of 2027. The revised average CPI for mid-2026 was only slightly raised by 0.1 percentage points to 3.8%, with overall CPI still expected to peak at 4.8% in mid-2026 and return to target levels by mid-2028. The Reserve Bank of Australia’s communication suggests the cash rate is at, but near, the upper end of the model-based neutral rate range, and current policy is considered restrictive. It is expected that, unless inflation data significantly exceeds expectations, the Reserve Bank of Australia will hold rates steady in June. The report states that the decline in the Australian dollar following the announcement was viewed as a short-term phenomenon, and the Reserve Bank of Australia has delivered on its hawkish stance and remains ready to take further action when necessary.