MNI BRIEF: RBA Surprise 25bp Hike, More Seen In "Period Ahead"

The Reserve Bank of Australia has signalled a slower pace of hikes after raising rates by 25 bps to 2.60%, while providing itself with policy flexibility by changing its language around additional hikes to "over the period ahead" from September's "over the months ahead."

The RBA snapped its run of four consecutive 50bps hikes, noting that the Cash Rate has increased "substantially" in a short period of time. It has raised rates 250bps since its May meeting. (See MNI STATE OF PLAY: RBA Seen Leaning Towards 50bps Hike)

The Bank said the size and timing of future rate increases will be determined by incoming data and the Board's assessment of the outlook for inflation and the labour market. The RBA repeated its language around keeping the economy on an "even keel" and the path to achieving this being a "narrow one".

The Australian dollar initially fell to AUD 0.6450 from AUD 0.6510 against the U.S. dollar, before recovering to 0.6475. Bonds rose, pushing yields lower, with the benchmark 3-year yield falling to around 3.00%, before settling around 3.22%.