Pressure Mounts on RBA to Tighten Monetary Policy

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The Reserve Bank of Australia ( RBA ) is receiving additional pressure with each passing week to tighten its monetary policy in the near future. Data has shown inflation rising in Australia at levels beyond expectations and analysts are now expecting the RBA to take steps to control such growth.

As an example of recent pressures mounting the RBA's next rate decision is Wednesday's report on surging import prices which rose an unexpected 1.4% on the quarter, above the expected 0.8%. This morning's higher-than-forecast Producer Price Index (PPI) out of Australia also supports this notion with a reading of 1.2% growth.


The Aussie dollar has been rising for some time, only recently experiencing uncertainty on Chinese rate statements following last week's G20/IMF meetings. Business sentiment in Australia is also rising with today's confidence survey by the National Australia Bank (NAB) signaling sufficient optimism emerging in the Aussie economy.

The combination of positive inflationary growth with speculation that the RBA will undertake monetary tightening in its next round will likely affect AUD values to the upside. Traders may want to take advantage and begin pricing in such expectations. Look to continue going long on the Aussie dollar in the near future.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.




This article appears in: Investing , Forex and Currencies

Referenced Stocks: RBA

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