Yesterday the Reserve Bank of Australia raised its cash rate by 25bp, short of the +50 the consensus were expecting:

Via Scotia overnight, a discussion on why I think the narrative that what the RBA did carries lessons for the rest of the world is exaggerated.

Scotia says the "key" reason

  • is that maybe the RBA just felt that pricing for the terminal rate was getting too aggressive at 4¼% pre-meeting. Governor Lowe said last month that he hoped the cash rate would come to rest within a 2.5–3.5% rate with ‘a few’ more rate increases over coming meetings. Well, markets are now more aligned with the upper end of that range after the decision.
  • The RBA didn’t turn more dovish relative to its prior guidance on the terminal rate; it only did so relative to markets that didn’t listen. You don’t have that same issue with pricing for the Fed, for instance, given broad alignment toward the dots.

AUD/USD update. trailing the pack after the RBA yesterday:

rba aud 05 October 2022