FXStreet (Guatemala) – Analysts at TD Securities explained that The Reserve Bank of Australia’s decision to hold its policy rate unchanged at 2.00% met market expectations but the decision to not reintroduce an explicit easing bias caught many by surprise.
Key Quotes:
“This decision followed on the heels of the May rate cut which failed to give forward guidance, however, the subsequent Minutes noted that the absence of forward guidance did not preclude future rate moves.”
“So while the tendency of the RBA not to offer guidance when cutting may have precedent, the lack of guidance when pausing this time may mask a more fundamental change in the conduct of monetary policy.”
“The RBA is merely the latest central bank to abandon forward guidance. The Bank of Canada was an early adopter in the summer of 2014, hence the exacerbated market response to its surprise cut in late January.”
“The Federal Reserve has also retreated into the communications fog by emphasizing in April that every meeting is ‘live’ when considering a rate hike. To better understand a world without forward guidance, it is worth reflecting on how the central bank communication has changed and how markets have responded.”
(Market News Provided by FXstreet)