Australian dollar slips as RBA hikes rates in a split decision

Australia’s Reserve Bank raised its cash rate by 25 basis points to 4.85% at its November meeting, marking the fifth increase this year, Business Recorder reported. The decision was not unanimous: three of the nine board members opposed the move. The Australian dollar fell 0.2% to $0.6986 on Tuesday after losing 0.5% overnight.

The increase was widely anticipated after core inflation reached 3.7% in the third quarter, above the RBA’s 2% to 3% target range. However, markets lowered the implied chance of another rise to 5.10% to about 24%, from 40% before the announcement. The bank also lifted its inflation outlook, indicating that price pressures are expected to remain elevated even if rates stay near current levels for a year or longer.

Australian three-year bond futures rose 3 ticks to 95.20 as investors reduced expectations for further tightening, while 10-year yields were near a two-month low at 5.145%. Capital Economics’ Asia-Pacific economics head said the RBA appeared more confident that policy was restrictive and expected it to have finished raising rates. The kiwi dollar was steady at $0.5614 after declining 0.3% overnight.